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BONNEVILLE PURCHASING

INSTRUCTIONSAppendices

Issued by the Head of the Contracting Activity

February 1, 2020

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B O N N E V I L L E P O W E R A D M I N I S T R A T I O N

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Table of Contents

Appendix 2-A, BPA Acquisition Workforce Contracting Certification Program…..3 Appendix 2-B, BPA Contracting Officer Appointment Instruction………………….30 Appendix 3, Standards of Conduct Regarding Purchasing and Assistance……...43 Appendix 12, How to Submit an Unsolicited Proposal……………...………………...51 Appendix 13, Contract Cost Principles for Commercial Organizations……………60 Appendix 14, COR Requirements for Contract Administration…………………….113 Appendix 19, Property Management Procedures for Contractors………………...163


BonnevillePowerAdministration’s

AcquisitionWorkforceContractingCertification

ProgramBPIAppendix2A

Issued by the Head of Contracting Activity Bonneville Power Administration

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1 Contracting Certification Program Introduction and Overview ............................................... 6

1.1 Introduction ..................................................................................................................... 6

1.2 General Information ........................................................................................................ 6

1.3 Coverage ........................................................................................................................ 7

1.4 Standards ....................................................................................................................... 7

1.5 General Skills and Experience for the Acquisition Workforce......................................... 7

1.6 Position Descriptions ...................................................................................................... 8

1.7 Annual Conflict of Interest Certification .......................................................................... 8

2 Certifications .......................................................................................................................... 8

2.1 Contracting Certification Programs - Overview .............................................................. 8

2.2 Changes within the Certification Program .................................................................... 10

2.3 Certification Requirements ........................................................................................... 11

2.4 Certification Effective Period and Expired Certifications............................................... 12

2.5 Fulfillment ..................................................................................................................... 12

2.6 College Credit ............................................................................................................... 13

2.7 Specific Training Requirements .................................................................................... 14

2.8 Required Training ......................................................................................................... 14

2.9 Reciprocity .................................................................................................................... 14

3 Bonneville Power Administration Certificate in Contracting (BPAC-C) ................................ 15

3.1 Overview ....................................................................................................................... 15

3.2 Training Standard ......................................................................................................... 16

3.3 BPAC-C Requirement Equivalencies ........................................................................... 16

3.4 Certification Reciprocity ................................................................................................ 16

4 Federal Acquisition Institute Certificate in Contracting (FAC-C) .......................................... 17

4.1 Overview ....................................................................................................................... 17

4.2 Education Standard ...................................................................................................... 17

4.3 Experience Standard .................................................................................................... 18

4.4 Training Standard ......................................................................................................... 18

4.5 Legacy Courses ............................................................................................................ 18

5 Continuous Learning Point (CLP) Program ......................................................................... 19

5.1 General ......................................................................................................................... 19

5.2 Continous Learning Points (CLP’s) .............................................................................. 19

5.3 Continous Learning Requirements ............................................................................... 20

5.4 Curricula Progression ................................................................................................... 21

5.5 Changes to Curricula/Certification Requirements ........................................................ 21

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5.6 Training Priority ............................................................................................................ 21

5.7 Training Sources .......................................................................................................... 21

6 Certification Application Process ......................................................................................... 22

6.1 Application Process ...................................................................................................... 22

6.2 Initial Application ........................................................................................................... 22

6.3 FAC-C Application Process FLow ................................................................................ 23

6.4 FAC-C and BPAC-C Certification Renewal .................................................................. 24

6.5 FAC-C Waivers ............................................................................................................. 24

Attachment 2A-1 - BPAC-C and FAC-C Certification and Training Requirements .............. 26

Attachment 2A-2 – BPAC-C and FAC-C Curriculum ........................................................... 28

Attachment 2A-3 – Continuous Learning Points (CLP) Matrix ............................................. 29

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1 CONTRACTING CERTIFICATION PROGRAM INTRODUCTION AND OVERVIEW

1.1 INTRODUCTION

(a) The Bonneville Purchasing Instructions (BPI) Appendix 2A (Acquisition Workforce Contracting Certification Program) provides the guidance to the Bonneville Acquisition Workforce (AWF) by outlining the requirements and processes to obtain and maintain both the Bonneville Power Administration Certificate in Contracting (BPAC-C) and/or the Federal Acquisition Certificate in Contracting (FAC-C). The AWF is generally defined as Bonneville employees that occupy GS-1102, 1106, and 1105-XX Contracting/Purchasing type Positions.

(b) Both certification programs are designed to enhance the quality of the AWF by attracting highly qualified personnel, as well as developing and advancing the skills and knowledge of current personnel. A properly trained and prepared AWF is vital to meeting Bonneville’s unique mission needs efficiently and effectively. This appendix to the BPI also defines the different options (tracks) for certification, the policies and requirements that govern both and finally the continuous learning points that are required to maintain those certifications.

1.2 GENERAL INFORMATION

(a) This Appendix describes both the BPAC-C and FAC-C certification programs and the minimum qualifications to achieve either and/or both certifications. These certifications are part of GS-1102 career development as a minimum in addition to the foundation required for these individual GS-1102’s to be eligible for appointment as a warranted Contracting Officer (CO). The Contracting Officer program is specifically outlined in Appendix 2B of the BPI.

(b) The authority to negotiate and enter into contracts, in the name of the United States on behalf of Bonneville Power Administration (Bonneville), is given to the Administrator by the Bonneville Project Act of 1937. The Administrator has further delegated the authority to purchase goods and services to the Head of the Contracting Activity (HCA), with the power of re-delegation. Appointment of individuals to act as Contracting Officers is accomplished by re-delegation of authority by the HCA to individuals as prescribed in Bonneville policy. Any level of Contracting Officer appointment shall not be made without a corresponding contracting certification in either the BPAC-C and/or FAC-C programs.

(c) A Contracting Officer (CO) is an individual authorized to contractually bind Bonneville as evidenced by a certificate of appointment issued by the Head of the Contracting Activity. The HCA and Contracts and Strategic Sourcing Organization (NSS) have jointly established the BPAC-C Contracting certification & qualification program including; education, job specific training, and experience criteria leading to certification and appointment of Contracting Officers.

(d) The NSS Organization is given the authority to manage the BPAC-C certification levels and assess the demonstrable proficiencies to include issuance of Contracting Certifications under this program until October 1, 2020. The requirements for training, education and experience are contained within this appendix. With that authority, NSS leadership is responsible for ensuring that the experience, education and training of personnel are complete before certifying and issuing a BPAC-C Certificate. Additionally, the same validation shall be completed by NSS prior to requesting a delegation of authority/

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appointment as a CO. A Purchasing Agent or Contract Specialist must be certified to Level I, II, or III prior to being nominated for a delegation of authority as a Contracting Officer (CO) above the Nominal level. The CO program is outlined in BPI Appendix 2B.

(e) The HCA will review all Director of Contracts and Strategic Sourcing (NSS) request(s) for an individual appointment as a Contracting Officer, and will approve such qualifications before any individual is authorized to serve as a Contracting Officer. Only those persons who have been delegated Contracting Officer authority in this manner may commit an expenditure of Bonneville funds via Contracts, Financial Assistance, Grants and/or Agreements covered under the BPI or BFAI respectively.

1.3 COVERAGE

The qualifications and certifications outlined in this appendix generally apply to Bonneville Acquisition Workforce (AWF) members in the GS-1102 series. These individuals are involved mainly in the development, execution and administration of contracts and financial assistance instruments for which guidance is outlined in the BPI and BFAI respectively.

1.4 STANDARDS

(a) Bonneville complies with the Office of Personnel Management (OPM) qualifications standards for personnel working in the GS-1102 Contract Specialist and/or Procurement Analyst professional job series. Refer to the OPM standards for detailed information regarding appointment, selections, qualification and promotion requirements. Personnel in job series GS-1102 grades GS-5 through GS-12 who do not meet the OPM minimum standard may retain their current grades and position if they occupied an equivalent position prior to January 1, 2000 and may advance in the career path to grade GS-12 as deemed appropriate and necessary by Supply Chain Services management.

(b) For all personnel selected for a GS-1102 Contract Specialist position after January 1, 2000, the individual must have obtained a baccalaureate degree in any field of study and/or earned 24 semester hour credits in business courses of accounting, business, finance, law, contract, purchasing, economics, industrial management, marketing, quantitative methods or organization and management. Promotion to grade GS-13 and above in the 1102 series requires a baccalaureate degree in business, or in any other field as long as it is supplemented by at least 24 semester hours in the business courses named above. The Contracts and Strategic Sourcing Organization may only request HCA waiver from the above requirements in extreme circumstances as may be necessary for continuity of operations, and will provide to the HCA an action plan and timeline for meeting these minimum standards.

(c) Bonneville requires training and certification of its AWF, which provides a common

foundation of knowledge, tools, and capabilities necessary to fulfill the needs and expectations of a highly skilled AWF that supports the agency mission. In addition to the above OPM standard, the minimum standards established in this Appendix shall also be met before an individual may be certified to any level of BPAC-C and/or FAC-C as applicable. Additionally, training, certification, experience and education requirements shall be met before an AWF member can be delegated authority as a Contracting Officer at Bonneville.

1.5 GENERAL SKILLS AND EXPERIENCE FOR THE ACQUISITION WORKFORCE

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(a) The purchasing knowledge, skills, and abilities necessary for a Contracting Officer designation are those required in the applicable Office of Personnel Management (OPM) Qualification Standards for GS-1102 and GS-1105 series positions, although the Contracting Officer function is not strictly limited to persons in those series.

(b) The following general skills and experience requirements apply to purchasing personnel at all levels of Certification and CO Authority.

(1) Communications skills to complete actions within a reasonable time, including oral, interpersonal, and business writing.

(2) Ethical conduct in business dealings as required by Federal Personnel Manual (5 C.F.R. 2635).

(3) Ability to understand and assist purchasing and program management personnel and to exercise consistently sound and fair business judgment.

(4) Proficiency in essential business computer skills, including word-processing, simple spreadsheets, and familiarity with enterprise system applications and tools.

1.6 POSITION DESCRIPTIONS

Any position description that includes Contracting Officer functions shall contain a clear statement of the Contracting Officer duties, responsibilities and functions. Where these functions are performed as a collateral duty, an addendum to the position description is to be prepared with the requisite information and be maintained in the employees personnel and/or training file.

1.7 ANNUAL CONFLICT OF INTEREST CERTIFICATION

(a) All AWF members must comply with conflict of interest and ethical conduct regulations in Appendix 3-A, Standards of Conduct Regarding Purchasing and Assistance, and BPI 3.1. The Head of the Contracting Activity (HCA) is responsible for standards of conduct regarding Bonneville purchasing and assistance activities. Annually, all Contracting Officers and other Bonneville employees who are personally and substantially involved in Bonneville purchasing and assistance activities must familiarize themselves with these purchasing and assistance standards of conduct.

(b) In coordination with Bonneville General Counsel, the HCA relies upon the annual certification by all Bonneville employees regarding ethical standards of conduct for employees of the Executive Branch (5 CFR Part 2635, as well as those specific to DOE included in 5 CFR Part 3301 and 10 CFR Part 1010 and 48 CFR Subpart 903.1, as supplemented by subpart 3.1 of this Appendix 2A and BPI Appendix 3A as the basis for Bonneville employee certification of standards of conduct for purchasing and financial assistance activities of Bonneville. Therefore, the HCA does not maintain separate annual certifications for standards of conduct regarding purchasing and assistance, relying instead upon the annual ethics briefing and certifications maintained by Bonneville General Counsel.

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2.1 CONTRACTING CERTIFICATION PROGRAMS - OVERVIEW

(a) The issuance or use of a policy, procedure, solicitation provisions, contract clause, method, The Bonneville Contracting Certification Program is designed to ensure that appropriate training is obtained and experience gained by all individuals who may be delegated authority

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to purchase on behalf of Bonneville. The process ensures consistency for all purchasing personnel to meet the same essential training and experience criteria and thus mitigates risk to the agency in execution of awards.

(b) Bonneville, based on its unique statutory authority, has a long standing exemption from the mandated use of the Federal Acquisition Institute (FAI) certification programs. This exemption allowed the Contracts & Strategic Sourcing Organization to manage a Contracting Certification Program, whereby certifications at three progressively higher levels were issued under the authority of the Bonneville Purchasing Instructions (BPI). These certifications which will be referred to as the BPAC-C throughout this document, are currently issued to GS-1102 employees who have completed the specific training requirements as outlined in this Appendix.

(c) The BPAC-C certification program described within this appendix is administered by the

Contracts and Strategic Sourcing Organization (NSS). The Director of Contracts & Strategic Sourcing (NSS) has been granted the authority to issue the BPAC-C certifications to the Bonneville GS-1102 staff pursuant to this Appendix. Under this authority the Director issues BPAC-C certificates to individuals who have fulfilled the training and experience requirements within prescribed Bonneville Power Administration Standards.

(d) All individuals who will execute purchases as part of their job duties must be certified with

either a BPAC-C and/or FAC-C prior to requesting a delegation of authority as a Contracting Officer. This requirement does not apply to individuals executing purchases via a Purchase Cards and/or under a Nominal Warrant. The Contracting Certification levels are generally classified as:

LEVEL I - Entry level purchasing agents and contract specialists. Generally for purchasing personnel who are in a training mode or mainly purchasing commercial goods and services.

LEVEL II - Increasing complexity of award actions at higher dollar values. Requires purchasing agents and contract specialists to possess greater skill in negotiation, price/cost analysis, contract execution and administration.

LEVEL III - Highest level of complex and major procurements, requiring comprehensive, advanced procurement skills. Reserved for Contract Specialists in the GS1102 job series.

(e) The Contracts and Strategic Sourcing Organization (NSS) is given the authority and

responsibility to manage and monitor the required training and experience activities and maintain records for BPAC-C and FAC-C certification Levels I, II, and III for all purchasing personnel working in the NSS organization. The HCA may review the certification files at any time for completeness and compliance.

(f) Effective January 1, 2006, all newly hired contract specialists must meet the criteria to obtain a Level I, II, or III Certification as described in Attachment 2A-1 and 2A-2, prior to requesting a CO Certificate of Appointment. All purchasing personnel on staff on that date must meet all elements of the certification criteria prior to requesting more authority than they currently possess on that date.

(g) The certification program is both sequential and progressive, with the training and

experience required for each Level building upon previous Certification Level requirements.

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Example: a Level I certified contract specialist will work toward obtaining certification at Level II and then to Level III. The increasing difficulty of the coursework and progressive complexity of work assignments also build upon prior requirements. Continuing education for COs below Level III may include training creditable toward the next Level. However, the core coursework to qualify for Level III may not include coursework previously credited toward Continuous Learning at Level III.

(h) Certification to a certain Level makes a CO eligible for a Certificate of Appointment and

certain dollar thresholds, but it is not a guarantee that the CO will be issued the highest authority within that level. The purchasing and process managers assess the determination of need for various levels of authority, based upon staffing and workload management, and other factors. The HCA retains the discretion to assign specific warrant authority to meet Bonneville’s business needs.

(i) Effective June 1, 2011: only prior relevant federal procurement work experience for a federal

agency may be credited as an equivalency for BPAC-C CO certification purposes.

2.2 CHANGES WITHIN THE CERTIFICATION PROGRAM

(a) Effective October 1, 2014: Currently the BPAC-C training curriculum is similar to the FAI training requirements for the three (3) separate levels of contracting certifications. The training curriculum of the BPAC-C program will continue to mirror that of FAI and will update immediately as changes are made to the FAI certification requirements. The elective requirements have been clarified as of the date of this publication as outlined in Attachment 2A-2. The BPAC-C training and certification requirements will update as FAI curriculum requirements for FAC-C certification change. Any changes made by FAI to the FAC-C certification requirements take effect on the BPAC-C certification requirements/curriculum on the date prescribed by FAI.

(b) Effective November 1, 2015: the Bonneville Head of the Contracting Activity (HCA) designated by the Department of Energy (DOE) Acquisition Career Manager (ACM) to manage the Federal Acquisition Institute (FAI) contracting certification program (FAC-C) at the agency level. Through this action the Bonneville HCA is appointed as the Site Acquisition Career Manager (SACM) and is given the authority to approve FAC-C certifications for the AWF at Bonneville within the FAITAS system. This change allows Bonneville AWF members to complete training, apply for and receive FAC-C certifications that are recognized throughout the Federal government. The Office of Federal Procurement Policy (OFPP) prohibits delegating authority to grant FAC-C certification(s) below the SACM.

(c) As part of the on-boarding process, employees transferring into Bonneville who already hold

a FAC reported in the Federal Acquisition Institute’s Training Application System (FAITAS) must be evaluated to determine if Bonneville-specific training requirements have been met (Refer to FAC Portability/Reciprocity in Section 3 of this Appendix.

(d) The FAC-C certification is applicable to all Executive Branch agencies that were established

through amendments to Title 41 of the U.S. Code, Section 433, by Congress in order to extend DAWIA-type certifications to non-DOD Executive Branch agencies. The Federal Acquisition Institute (FAI) was created to provide these government-wide certifications including:

Federal Acquisition Certification in Contracting (FAC-C) – **Currently the only FAI Certification Offered at Bonneville**

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Federal Acquisition Certification for Contracting Officer’s Representatives (FAC-COR) - **Not currently offered at Bonneville**

(e) The ability for Bonneville AWF members to utilize this government wide system and

certification program will allow for greater career opportunities and a more standardized/modern training program and system. The FAITAS system was designed for users to manage their training and certifications in a single system that has reciprocity throughout federal civilian agencies. If a Bonneville AWF member seeks opportunities in other agencies/departments, this certification is transportable whereas the BPAC-C is not. The training for the BPAC-C and FAC-C are identical, so with the addition of this second track, Bonneville AWF members have enhanced career training/certification options. The one exception to FAC-C reciprocity/portability is within the Department of Defense, which utilizes the Defense Acquisition University (DAU) and in some cases may have additional requirements for certification.

(f) The addition of the FAC-C program track within Bonneville eliminates the need to maintain two separate systems with the exact same training curriculum. An additional benefit is that the FAITAS system is self-contained and maintained outside of Bonneville, so there are zero resources devoted to ensuring system availability vs. the Bonneville system which is manually kept by a single training officer in a Microsoft Access platform. To modernize and streamline the Contracting Certification program within Bonneville, the decision by the HCA is to discontinue “sunset” the BPAC-C certification program on September 30, 2020.

(g) The BPAC-C Program is scheduled to be discontinued on September 30, 2020. The impact

to Bonneville AWF members is that effective October 1, 2020 no “new” BPAC-C certifications will be issued to any Bonneville staff. However, all valid BPAC-C certificates issued before October 1, 2020 will remain valid and recertified every 2 years as long as: 1) the Bonneville AWF member is currently occupying an 1102 position within Bonneville and, 2) the minimum CLP’s are completed by the certificate holder prior to the expiration date of the certification. A BPAC-C certification will be valid so long as the individual completes the appropriate number of certified/validated CLP’s required.

(h) Effective January 1, 2016 all newly employed Bonneville AWF members in the GS-1102

career series will be enrolled in the FAC-C certification program through FAITAS. New BPAC-C certifications will no longer be available/issued to these AWF members. This does not affect current Bonneville AWF members seeking higher BPAC-C levels; it only means that new GS-1102’s to Bonneville will start their training career utilizing the FAI curriculum and the FAITAS system to work towards their FAC-C.

2.3 CERTIFICATION REQUIREMENTS

(a) Contracting certification is obtained by meeting the standards established for the respective program. There are two standards for both the BPAC-C and FAC-C programs: experience and training. FAC-C has a third standard, education. Per OFPP, agency education waivers to OPM’s GS-1102 qualification standard for hiring/selection purposes do not satisfy the education standard for FAC-C.

(b) The experience standard can only be met through performance of relevant duties for the period of time required for that specific certification level. For example, to meet the experience requirements for certification in Contracting (FAC-C), relevant experience would

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be in the award and administration of contracts. The competencies for each certification program are available upon request from the SACM; see also the Federal Acquisition Institute’s (FAI’s) published competencies (knowledge, skills and abilities necessary for 1102s). These should be utilized by employees and supervisors in determining work assignments, mentoring and/or training/education necessary to gain appropriate experience.

(c) Contracting Certifications have three levels corresponding to junior, intermediate, and senior

levels of experience. For employees occupying the GS-1102 series, the levels are generally tied to grade ranges representing these experience/skill levels.

2.4 CERTIFICATION EFFECTIVE PERIOD AND EXPIRED CERTIFICATIONS

(a) In order for a Bonneville AWF member to keep current with changes in contracting knowledge, skills, and techniques, OFPP established a 2-year limit on federal acquisition certifications and a continuing education requirement. During the 2-year effective period of the certification, employees with an active FAC-C are responsible for earning and reporting the applicable number of Continuous Learning Points (CLPs) and applying for a 2-year renewal. This 2 year effective period is also applicable to the BPAC-C although the mandate is from the HCA through the BPI vs. the OFPP direction. It is incumbent on the AWF member with either a BPAC-C and/or a FAC-C to achieve/complete the required number of CLP’s in the 2 year period following the issuance of the certificate.

(b) BPAC-C CLP Currency – CLP’s required to keep a BPAC-C current is approved through the NSS Training Officer/Manager as designated by NSS. The CLP program for all BPAC-C certifications is managed by the NSS Training Officer/Manager. The 80 CLP’s required to maintain a BPAC-C certification must be submitted and approved BEFORE the certification expires.

(c) FAC-C CLP Currency – CLP’s required to keep a FAC-C current are required to be

submitted through the FAITAS system. The CLP’s are tracked through this automated system and to keep the certification current, the 80 hours required every 2 years must be submitted and approved within the FAITAS system BEFORE the certification expires. FAITAS will automatically cancel a FAC-C in the system for failing to report completion of the minimum CLPs prior to expiration.

(d) Expired BPAC-C and FAC-C Certifications – An expired certification which is the foundation

for a CO Warrant, renders that warrant invalid/expired. Any contract/modification actions executed with an expired warrant are considered unauthorized commitments and shall require a ratification action to be processed. Additionally, if the certificate expires, a number of refresher training classes must be taken to reinstate the certification(s) unless waived by the HCA. FAC-C reinstatement may also require completion of additional courses if the curriculum was changed since the original certification was issued to the AWF member.

2.5 FULFILLMENT

The fulfillment process allows Bonneville AWF members to receive official credit for mandatory course requirements based on documentation that they have achieved the competencies taught in the course through other means. It is intended to avoid sending the Bonneville AWF to training unnecessarily and to improve access to seats in courses to those who need them. However, the program is not intended to be used as a substitute for needed career or professional development training, nor is it intended to restrict attendance at any course for members who do, in fact, require the training being offered.

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(a) FAC-C - Certification is obtained by meeting the respective training, experience, and

education standard. OFPP permits granting fulfillment of courses under the training standard based on experience or education, or equivalency, if the individual has taken courses from alternate providers, and under rare circumstances, waivers which must be approved by the DOE Chief Acquisition Officer or the Senior Procurement Executive, depending on the certification.

(b) BPAC-C - Certification is obtained by meeting the respective training, and experience. The Director of Contracting and Strategic Sourcing approves fulfillment requests and forwards each request to the HCA for approval under this certification program.

(c) Bonneville AWF members shall first utilize FAITAS to request FAC-C fulfillment or waivers.

Additionally, these requests need to utilize any and all standard methods prescribed by NSS local procedures.

(d) To be granted, the fulfillment application must demonstrate that the applicant meets the

course competencies at the specific level sufficiently to forego attendance. The applicant must provide: (1) The dates of training, course descriptions, provider names, grade obtained (if

applicable), and competencies achieved for the course for which fulfillment is sought. (2) If the applicant is using job experience, they must list the agency, dates, location, title of

position and the duties performed that imparted the relevant competencies. (3) If an applicant obtained competencies through academic courses provided at an

accredited institution, they must provide the dates of each class, course descriptions, provider names, grades (if applicable) and competencies achieved.

(e) After reviewing the member’s self-assessment, the supervisor concurs or non-concurs on the application. If (s)he concurs, the supervisor forwards the entire package through the SACM/Head of Contracting Authority (HCA) for signature and submission to the ACM. The ACM will present the application to the board of functional advisors/Acquisition Advisory Board which will recommend approval or disapproval to the approving official designated by OFPP for the particular certification. Approved fulfillments will be returned to the member for their records. Disapproved requests will be returned to the member with the rationale for disapproval.

(f) An approved copy of the fulfillment form must be forwarded by the member to the Training Officer and/or Manager responsible for maintaining employee training records for inclusion in the member’s official training and/or personnel file. The AWF member is responsible for loading the relevant information into FAITAS.

2.6 COLLEGE CREDIT

(a) Some of the courses provided by DAU and FAI have been reviewed by American Council on Education (ACE) and recommended for college credit. Workforce members currently enrolled in a degree program should check the DAU website to determine if they can get college credit for attendance at a DAU course, and pursue obtaining such college credit through their college/university.

(b) Colleges and universities will typically review the course syllabus and materials and the ACE recommendation before deciding whether or not to grant college credit.

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(c) While a college or university may accept government acquisition training towards a degree program, such training appearing on a college transcript cannot be applied towards the FAC-C education standard. Per DAU, “These credit recommendations cannot be used to meet education requirements.” Per OPM, “Education and training are separate components of agency career development programs. Training courses are designed to build job-specific knowledge and skills, complementing and supplementing the general level of knowledge and skills acquired through formal college education. The 24-hour requirement is intended to be satisfied through coursework taken at colleges and universities.”

2.7 SPECIFIC TRAINING REQUIREMENTS

(a) Qualification of Training Courses - Core certification must be obtained through coursework that is qualified for FAC-C certification or sponsored by a professional organization such as Institute for Supply Management (ISM), an accredited secondary education institution (such as a university or community college), or a commercial training company or other entity that has been approved by the HCA.

(b) NSS shall establish a program that describes HCA approval of training providers, and approved courses. Training courses that are developed and conducted within the purchasing groups must be pre-approved by the HCA in order to qualify as meeting any education/training requirement. Informal discussions or “brown bag” sessions are insufficient. Courses previously approved by the HCA do not require resubmission.

2.8 REQUIRED TRAINING

See the table in Attachment 2A-1 of this Appendix for the detailed list of required training courses at each level of certification, and the associated levels of contracting officer authority.

2.9 RECIPROCITY

(a) DAWIA (1) A valid, current DAWIA certification in contracting is equivalent to a FAC-C at the same

certification level. (i) The employee is responsible for providing the necessary documentation of the

DAWIA certification and the appropriate continuous learning history to ensure validity and currency of the DAWIA certification. Acceptable documentation includes:

(ii) Department of Army – Acquisition Career Record Brief (ACRB) (iii) Department of Air Force – Acquisition Professional Development Program Record

(APDP) (iv) Department of Navy – Contract Professional Development Program (DoN DAWIA

Transcript) (2) To determine if the employee is eligible for reciprocity follow the procedures outlined.

(i) Employee creates a FAITAS profile (ii) Employee submits supporting documentation to the SACM for review and validation

of certification/CL. (iii) If certification/CL cycle is current SACM forwards documentation to the FAITAS

Administrator for review and validation. (iv) Once validated, the certification is manually entered into FAITAS with the original

date of the DAWIA certification (Bonneville specific certification requirements are to be met during the CL cycle).

(v) If supporting documentation is not furnished, the employee must request certification through FAITAS. Current certification standards will apply.

(3) Federal

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(i) Certifications issued by other Federal agencies are accepted with proof of certification and continuous learning following the validation procedures. (A) SACM checks FAITAS to determine if the employee has an existing certification

listed in FAITAS. (B) If certification record exists and shows as current, no further action is required.

Follow Bonneville specific certification requirements during the CL cycle). (C) If no record exists, the employee provides FAC-C Certification certificate along

with documented proof current CL requirement (official email, or memorandum from previous issuing agency ACM or designated representative detailing certification information).

(D) SACM forwards documentation to the FAITAS Administrator for review and validation.

(E) If the certification is validated, record is manually entered into FAITAS with the original date of the FAC-C certification.

(ii) If supporting documentation is not furnished the employee must request certification through FAITAS. Current certification standards will apply.

(4) BPAC-C (i) There is no stated reciprocity for a FAC-C certification based on an existing BPAC-C

certification. Although the curriculum, experience and training for a BPAC-C are similar to that of FAC-C, there is no standing reciprocity. Many classes are valid for both, but the issuance of a FAC-C will not be based solely on the presentation of an existing BPAC-C.

(ii) To be granted a FAC-C a complete evaluation of education, experience and training will be “cross-walked” against current FAI standards.

3 BONNEVILLE POWER ADMINISTRATION CERTIFICATE IN CONTRACTING (BPAC-C)

3.1 OVERVIEW

(a) The Bonneville Power Administration Certificate in Contracting (BPAC-C) is a program covering GS-1102’s employed within Bonneville. The Director of Contracting and Strategic Sourcing (NSS) within Supply Chain Services (SCS) is the authority that signs and issues the three levels of certification. Waivers and fulfillment requests shall be approved by the Bonneville HCA before certifications can be issued.

(b) Courses sponsored by a professional organization such as Institute for Supply Management

(ISM), secondary education institution such as a university or community college, and/or certain commercial training companies are acceptable. The Director of Contracts & Strategic Sourcing and HCA will jointly approve the training entities to ensure relevant and thorough course content.

(c) Training courses that are developed and conducted within the purchasing groups must be pre- approved by the HCA in order to qualify as meeting any education/training requirement. Informal discussions or “brown bag” sessions are insufficient. Courses previously approved by the HCA do not require resubmission.

(d) Bonneville Enterprise System (BES) courses for the agency’s electronic purchasing system

focus on use of the software application(s) rather than on purchasing fundamentals.

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Although these courses may be required to obtain access to the application(s) to generate and execute awards, none of these training courses will be credited toward certification.

3.2 TRAINING STANDARD

The training standard for issuance of a BPAC-C certification requires completing specific training assigned to each level. The table in Attachment 2A-1 of this Appendix provides a detailed list of required training courses at each level of certification for both the BPAC-C. Bonneville has additional requirements for the BPAC-C certification Program as follows: (a) The Introduction to the Bonneville Purchasing Instruction (BPI) is required to be completed

before the issuance of a new BPAC-C and/or upgrade from Level to Level.

(b) The Bonneville AWF member only has to complete the Intro to BPI course once.

3.3 BPAC-C REQUIREMENT EQUIVALENCIES

(a) The HCA may determine that a nominee's prior experience, training, or other professional qualifications fulfill the work experience and/or training requirements for Nominal, Level I, or Level II Certification. The Director of Contracts & Strategic Sourcing (or delegate) may request an HCA decision if the nominee has obtained:

(1) Professional level certification awarded by a nationally-recognized professional purchasing, contract management, logistics management, or supply chain management organization;

(2) Bachelor’s or graduate degree from a nationally-accredited college or university, in the fields of purchasing or contract management;

(3) Graduate degree from a law school accredited by the American Bar Association; (4) Documented, substantially extensive work experience and related training in a

federal contracting or supply management for a federal agency; or (5) Current FAC-C certification in addition to completion of the Intro to BPI class.

(b) The Director of Contracts & Strategic Sourcing (or delegate) shall submit the request for

HCA consideration in writing, including: (1) a brief business analysis of the merits for granting equivalency; (2) A full discussion of the nominee's relevant training and experience with a crosswalk

to the BPI criteria; (3) The specific, desired level of certification; and (4) A description of the potential negative impact on the contracting activity if

disapproved. (5) Copy of the individuals’ current FAC-C certification, if applicable

(c) The HCA may concur with the purchasing manager's request, grant a different level of

certification based on the documentation presented, or reject the request with an explanation thereof.

3.4 CERTIFICATION RECIPROCITY

Reciprocation for the issuance of a BPAC-C may be granted to an individual who has a current FAC-C and/or DAU (DAWIA) Contracting Certification. Bonneville AWF staff members who arrive at Bonneville with a current FAC-C and/or DAWIA Contracting Certification may be granted reciprocity and issued a BPAC-C (until October 1, 2020) at the equivalent level under a few conditions outlined here:

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(a) The FAC-C and/or DAWIA issued certification is current as evidenced by the date of

certificate issuance

(b) If the certification has lapsed, evidence of 80 CLP’s have been obtained in the timeframe since the certification was issued (See 2.4 (c))

(c) All equivalencies and/or waivers issued by the previous agency must be evaluated and

approved by the Bonneville HCA.

(d) Additionally, backup documentation (transcripts and/or class certificates) may be required if the certification has lapsed and/or is over 10 years old. The HCA will make the final determination on the acceptance of the documentation.

4 FEDERAL ACQUISITION INSTITUTE CERTIFICATE IN CONTRACTING (FAC-C)

4.1 OVERVIEW

(a) The Federal Acquisition Certification in Contracting (FAC-C) establishes a uniform set of standards recognized by all Executive Branch (civilian) agencies as evidence that an individual meets core education, experience and training standards for the contracting career field at the junior, intermediate and senior levels. These requirements are sequential and cumulative; i.e., FAC-C Level I must be earned before pursuing FAC-C Level II, and so forth (refer to Section 5 - Curricula Progression).

(b) Agencies are permitted to tailor electives in the FAC-C program to their agency’s

mission/needs. At Bonneville, specific courses are substituted for some electives to address skill gaps and develop expertise tailored to Bonneville’s contracting needs (see 4.4 Training Standard).

(c) FAC-C certification is an optional certification track for AWF members at Bonneville until

October 1st, 2020, when the BPAC-C is no longer available for initial issuance. Optional: All Bonneville AWF members hired before January 1, 2016 can hold a BPAC-C in lieu of the FAC-C certification.

(d) As required by OFPP, the levels for FAC-C for GS-1102 employees are generally tied to

grades as shown below:

Grade Level Skill Level

GS-05/07 I Junior

GS-09/11/12 II Intermediate

GS-13 and above III Senior

4.2 EDUCATION STANDARD

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To qualify for FAC-C at the respective level, the education requirements in the GS-1102 Contracting Series Qualification Standard, published by the Office of Personnel Management (OPM), must be met. The education standard for Levels I and II aligns with the GS-1102 education requirement up through GS-12. The Level III education standard aligns with the GS-1102 education requirement for GS-13 and above. An employee must meet the appropriate education standard to be certified (see Section 2 above). Waivers are not transferrable-example: a FAC-C issued by the Department of Interior with a waiver cannot be transferred to another agency.

4.3 EXPERIENCE STANDARD

OFPP advises that experience is generally based on OPM’s GS-1102 Contracting Series Qualification Standard. OFPP advises working with the cognizant human resources department to ensure a consistent interpretation of the types of experience that count toward the qualification standard.

FAC-C Refresh recommends that “agencies ensure that the contracting workforce get not only the right number of years of experience, but also the breadth and depth of experience required to strengthen their skills and expertise. OFPP Policy Memorandum dated May 2014 FAC-C Refresh.

4.4 TRAINING STANDARD

The training standard requires completing the FAC-C curriculum specific to each level. The Federal Acquisition Institute (FAI) publishes and maintains the FAC-C training curricula on its website. Bonneville has additional “Agency Specific” requirements for the FAC-C certification program. (a) The Introduction to the Bonneville Purchasing Instruction (BPI) is required before issuance

of: new/renewal of a FAC-C, and/or upgrade from one Level to another Level.

(b) A member that has an existing FAC-C is still required to complete the Intro to BPI course

within the first 6 months of employment with Bonneville.

4.5 LEGACY COURSES

Information about legacy courses and crosswalks for previous requirements for contracting certification can be found beginning on page 2 of OFPP’s January 2006 FAC-C memorandum. Crosswalks for older legacy coursework to later equivalents are available from FAI and DAU. FAC-C holders should generally not repeat completed coursework for renewal purposes unless so much time has passed that the course is substantially changed (e.g., 2 years). Non-1102s holding a specialized/limited contracting officer’s warrant are required to complete continuous learning tailored to their warrant authority as specified in Section IV of this Handbook in order to qualify for FAC-C renewal. For all others, at least half of the minimum required CLPs for renewal credit must be from one or more of the targeted Continuous Learning tracks listed below. The remaining CLPs may be earned by completing qualifying events described in the CLP Accreditation Table (see Attachment 2A-3 for further guidance).

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5 CONTINUOUS LEARNING POINT (CLP) PROGRAM

5.1 GENERAL

Continuous learning includes meaningful and relevant training and developmental opportunities. Both the BPAC-C and FAC-C certifications have continuous learning requirements that must be met every 2 years to renew the certification/maintain currency. Following are the biennial continuous learning requirements by certification program: Certification Renewal Minimum

BPAC-C 80 CLPs – Every 2 years

FAC-C 80 CLPs – Every 2 years

5.2 CONTINOUS LEARNING POINTS (CLP’S)

(a) Bonneville FAC-C and BPAC-C Certification holders are responsible for earning and reporting required continuous learning points (CLPs) to FAITAS or NSS CLP Tracking (the tracker), as applicable. The NSS Training Officer is responsible for tracking and certifying to the Director of Contracting and the HCA as required, that the BPAC-C holder has completed the 80 CLP’s during the applicable timeframe.

(b) Prior to approving a member’s BPAC-C CLP request in the tracker, the NSS Training

Officer is responsible for ensuring that the reported event qualifies for continuous learning credit in accordance with the CLP Accreditation Table, and consulting the SACM (HCA) for guidance when necessary. All FAC-C CLP requests shall be entered and tracked through the FAITAS system.

(c) For site-hosted training events that qualify for continuous learning credit, the event

organizer(s) shall coordinate with the SACM (HCA) and/or staff who review the proposed curriculum and NSS recommended CLP’s, to make the final determination on the appropriate number of CLP’s for the event.

(d) Responsibility for retention of course/event completion certificates or other records for

continuous learning is the same as for initial certification. If unavailable, the employee should attempt to obtain supporting documentation from the event organizer or other responsible source. Only after all alternatives have been exhausted, a supervisor’s written approval may provide confirmation that the activity was taken/ attended/ completed. Ultimately for the BPAC-C this attestation can be made by the Director of Contracts and Strategic Sourcing, whereas with the FAC-C, the approval of the CLP’s is made at the SACM (HCA) level.

(e) The FAC-C and/or BPAC-C level required for the employee’s grade/position must be

attained within (1) 18 months from the date of hire; or (2) the date the applicant will meet the FAC-C experience standard (e.g., 1, 2, or 4 years depending on level), whichever occurs later.

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(f) An extension to this requirement may be granted by the SACM (HCA) for circumstances prohibiting achievement of the requisite certification level by the applicable deadline. The circumstances causing the delay must be documented and a schedule of completion attached, including registration in any outstanding coursework. Failure to plan is not justification for an extension.

5.3 CONTINOUS LEARNING REQUIREMENTS

(a) Effective October 15, 2014: To improve and maintain currency of knowledge and skills, contracting officers who have satisfied the mandatory training requirements are required to obtain at least 80 points of continuing education or training every two years. Failure to obtain the mandatory continuing education or training requirement will result in the loss of certification and/or warrant authority. Continuing education can be obtained through attending courses in Attachment 2A-3 in this Appendix, attendance at training developed and conducted within the purchasing organization that is pre-approved by HCA, or attendance at professional association meetings or seminars.

(b) To maintain a FAC-C, contracting professionals are required to earn 80 continuous learning points (CLPs) every two years, beginning with the date of their certification. Acquisition career managers (ACMs) monitor the continuous learning requirements for individuals holding FAC-Cs to ensure they meet these requirements. It is the contracting professional’s responsibility to ensure that his/her continuous learning requirements are met.

(c) Hours in excess of the minimum requirements may not be carried forward for credit beyond

the current period. In general, no single activity should be used to accumulate all CLPs required for maintenance of their certification. Contracting professionals should make an effort to participate in a variety of acquisition-related activities designed to give the member a well-rounded perspective of the acquisition function. However, a single course/training event that is equal to and/or greater than 80 CLP’s will satisfy the 2-year re-certification requirement.

(d) Contracting professionals are encouraged to take the classes recently added to the contracting certification program since obtaining their certification. Continuous learning can also be used to strengthen an individual’s skills and capabilities in the specialized areas in which they work. An example would be taking basic IT classes for those buying information technology. Taking courses outside the area of contracting such as project management helps broaden the contracting professional’s understanding of their customers.

(e) Continuous learning is more than just taking classroom or online training. Points can be awarded for participation in professional organizations, publishing articles on contracting and procurement, speaking at events where the topic is contracting and procurement, rotational and developmental assignments. When using these types of activities for CLP purposes, the contracting professional and their supervisor should pre-define the number of CLPs recommended for the activity.

(f) Attachment 2A-3 outlines sample activities and the number of CLPs recommended for

completing them. This is a sample list and is not intended to be all-inclusive. The Bonneville HCA may establish/approve different CLP values for the listed activities, but generally each hour of instruction is equivalent to 1 Continuous Learning Point (1 HR = 1 CLP). Individuals should seek guidance through their supervisor and NSS Training Program Manager in the assignment of CLP values for activities listed and those being contemplated.

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5.4 CURRICULA PROGRESSION

(a) The BPAC-C and FAC-C certification programs are designed so that Bonneville AWF members develop cumulative knowledge and skills to analyze and resolve on-the-job issues. Completion of core courses in the order presented is necessary so that the appropriate level of knowledge is available for performance at a particular level and that later courses can build on the knowledge gained from earlier courses. In addition, prerequisite courses must be completed prior to taking courses that require them. Please note that FAITAS will reject course registration if the prerequisites have not been completed unless/until a waiver from the Bonneville SACM (HCA) is received.

(b) The requirements for certification build on each other. An individual must meet the requirements for previous levels of certification before beginning training for the next level. For example, in order to begin working on Level II, an individual must have earned a Level I certification and/or completed all of the requisite courses for that level, but the actual certification was still pending. To be certified to a particular level, a workforce member must meet all of the standards and mandatory electives established for that level and apply for certification.

5.5 CHANGES TO CURRICULA/CERTIFICATION REQUIREMENTS

From time to time, FAI or OFPP may change the certification requirements for the FAC-C certification. The Bonneville SACM (HCA) may authorize mandatory training and experience requirements for certification in addition to those established by OFPP. Additionally, changes in Bonneville’s program may be required due to changes in the acquisition environment. Members of the AWF may also see a need for changes; however, certification requirements may only be changed with the approval of the Bonneville SACM (HCA).

5.6 TRAINING PRIORITY

Supervisors are responsible for ensuring that workforce members are provided the opportunity to meet the mandatory certification requirements of their acquisition position and career field. In order of priority, spaces must be allocated to employees for training: (a) Required by law,

(b) Established as mandatory by Bonneville and training is needed to qualify an incumbent for

their position,

(c) To become eligible for the next higher career level after completion of mandatory training for incumbent positions,

(d) For new assignments,

(e) That is “desired/elective,” and

(f) Other.

5.7 TRAINING SOURCES

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(a) Training requirements for both the BPAC-C and FAC-C can be satisfied using any of the following sources:

(1) Completion of the required courses from FAI, Defense Acquisition University (DAU), another federal agency (OFA) or the specified training provider, if applicable;

(2) Completion of a course certified as equivalent by DAU and/or FAI; (3) Completion of courses required for DOE-unique acquisition certifications (CFA, TPO,

Property Management, Real Estate, TIA) which may or may not be available from Bonneville/DAU/FAI/OFA; or

(4) Fulfillment.

(b) Training sources that incur a cost to the Bonneville should only be used when circumstances justify it; e.g., courses not available from a no-cost source such as FAI, DAU or DOE. The authority/discretion for this decision is given to the Director of Contracts and Strategic Sourcing and/or delegate.

6 CERTIFICATION APPLICATION PROCESS

6.1 APPLICATION PROCESS

(a) As Bonneville is migrating to the standardized use of the FAITAS system to manage FAC-C certifications, it is recommended that all Bonneville AWF members and their supervisors should be registered in FAITAS, regardless of their intent to pursue FAC-C certification. Some Bonneville AWF members who already possess a FAC-C are required to maintain CLP currency within FAITAS, as the renewal of the FAC-C certifications can only be completed in this system.

(b) Bonneville’s migration to FAITAS certification management began in November 2015 starting with FAC-C and CLP management. Application through FAITAS will be initiated by the Bonneville contracting staff member using the system prompts. The following application procedure remains in effect for certifications not managed by FAITAS. An application moves through FAITAS following the same path as described below.

(c) Records, including fulfillments, waivers, and certification information, must be maintained in

official training records as well as in corresponding information systems. The AWF member is also responsible for keeping copies of documents and certificates related to their training, education, experience, and certification.

6.2 INITIAL APPLICATION

(a) Requests for BPAC-C and FAC-C certification of Bonneville AWF members are accepted throughout the year and should be submitted to the HCA/SACM, through the Director of Contracts and Strategic Sourcing (or designee) after requirements are completed.

(b) BPAC-C Certifications: are approved locally within the NSS Organization, but no lower than the Director of Contracts and Supply Chain. This authority cannot be delegated.

(c) FAC-C Certifications: are processed and approved through the FAITAS system with Training

Officer and Supervisor approval. The final approval for issuance of a FAC-C resides with the Bonneville SACM/HCA.

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(d) The formal application must include: (1) Certification currently held and issue date (if applicable); (2) Certification level requested; (3) How the standards for the requested level were met; and (4) Copies of course certificates or other documentation supporting completion of the

standards not available in FAITAS.

(e) Per OFPP, the applicant is responsible for including with the application certificates, transcripts, and records supporting the education, experience, training and continuous learning standards. The applicant and the local Training Officer are responsible for maintaining copies of certificates of course completion and other records not logged in FAITAS.

(f) The SACM(HCA) and/or Director of Contracts and Supply Chain will review the FAC-C and BPAC-C applications respectively, and if approved, will return the approved application to the AWF member indicating the level the member is certified to. The member is responsible for ensuring that the organization responsible for maintaining employee training records includes the documentation in the member’s personnel file.

(g) For the BPAC-C, the Director of Contracts and Supply Chain will include a certificate for the

member with the approved application. Managers are encouraged to print out and present the certificate in a manner appropriate to the accomplishment.

(h) For the FAC-C, the approved certificate will be made available within the FAITAS system for

record. Managers are encouraged to print out and present the certificate in a manner appropriate to the accomplishment.

(i) Bonneville AWF members are encouraged to display the certificate in their workspace. (j) If the application is disapproved, the application will be returned to the requestor with the

reasons for disapproval.

6.3 FAC-C APPLICATION PROCESS FLOW

(a) Once Bonneville 1102 staff member(s) are issued a Federal Acquisition Certification (FAC), they hold the certification at the respective level, and it is transferrable to other civilian agencies as long as it:

(1) was not granted based on a waiver to any of the standards; and (2) the requirements to maintain certification are met, irrespective of changes in the

standards/curriculum after the certification was issued.

(b) Applications for a FAC-C based on current DAWIA certification or FAC-C granted by another federal agency not reported in FAITAS, will be granted at the same level for the same 2-year period established by the issuer unless based on waivers.

Example: An individual came from an outside agency 14 months after the FAC-C was issued and/or renewed. The FAC-C will be reissued from Bonneville through FAI with the same issuance date, in this case 14 months into the 2-year CLP cycle. This also indicates that the individual has 10 months to complete their 80 CLP’s before expiration.

(c) The employee is responsible for providing the necessary documentation of the DAWIA

certification and the appropriate continuous learning history to ensure validity and currency

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of the DAWIA certification. (S)he may accomplish this by contacting the FAITAS Help Desk to have his/her records transferred to Bonneville oversight, thereby making them available to the SACM and ACM.

(d) Continuous learning taken prior to entry on duty at Bonneville not available in FAITAS must be supported by appropriate documentation and subsequently approved by the Bonneville SACM (HCA). In addition to confirming that continuous learning requirements have been met, the SACM (HCA) is responsible for determining if applications based on certification issued by another agency include completion of the Bonneville mandatory electives and/or additional agency level requirements for the particular certification. Any missing requirements must be identified and completed as continuous learning. A reciprocity application and worksheet documenting completion of Bonneville mandatory electives is available upon request from the SACM (HCA) office.

(e) Upon approval, the SACM (HCA) office will return the approved application with the outstanding mandatory electives identified for continuous learning.

6.4 FAC-C AND BPAC-C CERTIFICATION RENEWAL

(a) Both the FAC-C and BPAC-C Certification(s) must be renewed every 2 years from the date of initial issuance. Certificates for certifications renewed by the tracker are optional and may be obtained by submitting an application to the SACM. However, the system renewal notification and cycle dates in the tracker serve as evidence that the certification is current as well as its effective period.

(b) Upon receipt of a system renewal notification, the supervisor should take this opportunity to assess the skills and competencies of the member and updating the member’s IDP and/or plan for enhancing or adding to the member’s competencies, as appropriate.

6.5 FAC-C WAIVERS

(a) OFPP stipulates that, in the case of FAC-C, “A candidate must meet the education and experience requirements established in the Contract Specialist (GS-1102) Qualification Standard. There are no exceptions to these requirements and candidates must provide evidence of this to the SACM (HCA).” Additionally, “...education waivers granted by the agency, in accordance with the [GS-1102] Qualification Standard...do not satisfy the education requirement for a FAC-C. An employee must meet the appropriate education requirements to be certified.”

(b) For Example, a GS-1102 that was promoted based on an agency waiver of the OPM education standard will be certifiable up to the FAC-C Level supported by their actual education history.

(c) Temporary waivers to the certification requirements are permitted as follows:

(1) The Bonneville SACM (HCA) may decide to waive some or all of the BPAC-C and/or FAC-C requirements for warranting purposes for a period not to exceed 12 months, where it is demonstrated to be in the best interests of the agency. A certification waiver permits an AWF member who does not meet the certification requirements of the position to remain in that position without being certified for the period indicated in the waiver. It does not certify the member and it does not carry over from one position to another. It only allows a member to remain in a specific position without meeting the certification requirements. The waiver is only for the member’s current

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position. The waiver is initiated by the applicant’s immediate supervisor. Further, a certification waiver does not negate the responsibility of management and the member to continue to pursue certification.

(2) Waiver request templates are available upon request from the SACM. In order to be considered, the content cannot be altered or otherwise edited; all areas must be addressed. Approval of a waiver does not relieve the grantee of the requirement to obtain training leading to the requisite certification level. The SACM is responsible for following up with the individual to insure that progress is made and certification is obtained per the waiver commitment.

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Attachment 2A-1 - BPAC-C and FAC-C Certification and Training Requirements

As of October 1, 2015

27


28


Attachment 2A-2 – BPAC-C and FAC-C Curriculum

As of October 1, 2015

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Attachment 2A-3 – Continuous Learning Points (CLP) Matrix

Recommended Continuous Learning Points (CLPs)

Sample Activity CLPs

Formal and informal training (such as FAI and DAU classroom or online courses)

1 CLP per hour of instruction

Accredited higher education courses (from a college or university)

10 CLPs per semester or quarter hour (generally)

Continuing Education Unite (CEU) 10 CLPs per CEU

Equivalency Exam for course (i.e., “testing out”)

Same points as awarded for the course

A learning event such as a seminar, brown bag, or presentation

1 CLP per hour if attending the learning event

1 CLP per hour for preparation if leading the learning event

A maximum of 20 CLPs per year for this type of activity

Attendance at professional association meetings

1 CLP per meeting hour with a maximum of 20 CLPs per year

Participation in intra- or interagency groups where the topic is some element of acquisition

1 CLP per meeting hour with a maximum of 20 CLPs per year

Association leadership role 1 CLP per meeting hour with a maximum of 20 CLPs per year

Professional license or certification 20 to 40 CLPs

Publication of an article or articles on an element of acquisition

1 CLP per preparation hour with a maximum of 20 CLPs per year

On-the-job experimental learning 1 CLP per hour of activity with a maximum of 20 CLPs per year

Mentoring 1 CLP per hour of activity with a maximum of 20 CLPs per year

Rotational or developmental assignments

12 month assignment or detail 9 months 6 months 3 months 2 months 1 month

Based on learning achieved and length of assignment or detail

CLP Recommendation: 80 CLPs 64 CLPs 45 CLPs 35 CLPs 30 CLPs 20 CLPs


ContractingOfficerAppointmentInstruction

BPIAppendix2B


31


1 Contracting Officer Appointment Introduction and Overview ............................................... 32

1.1 Contracting Officer Appointment Program Introduction ................................................ 32

1.2 Coverage ...................................................................................................................... 32

1.3 Standards ..................................................................................................................... 33

1.4 Exclusions .................................................................................................................... 33

2 Contracting Officer Nomination and Appointment ............................................................... 33

2.1 Certificate of Appointment (Warrant) ............................................................................ 33

2.2 Interim Certificate of Appointment (Warrant) ................................................................ 34

2.3 Certificate of Appointement (Warrant) Minimum Requirements ................................... 34

2.4 Performance Evaluation ............................................................................................... 34

2.5 Suspension or Termination of a Warrant ...................................................................... 34

2.6 Contracting Officer Files ............................................................................................... 35

2.7 Documentation ............................................................................................................. 35

2.8 Categories of Contracting Warrant Authority ................................................................ 35

2.9 Special Training Requirements .................................................................................... 36

2.10 Required Length of Experience .................................................................................... 36

2.11 Dollar Limitations on Contracting Warrant Authority ..................................................... 36

2.12 Waivers and Interim Warrants ...................................................................................... 36

2.13 Preparation of the Warrant Nomination ........................................................................ 36

Attachment 2B-1 – Contracting Officer Warrant Levels & Minimum Requirements ............. 38

Attachment 2B-2 – Contracting Officer Warrant Sample ..................................................... 39

Attachment 2B-3 – Warrant Request Letter and Form ........................................................ 40

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1 CONTRACTING OFFICER APPOINTMENT INTRODUCTION AND OVERVIEW

1.1 CONTRACTING OFFICER APPOINTMENT PROGRAM INTRODUCTION

The Bonneville Purchasing Instructions (BPI) Appendix 2B Contracting Officer Appointment Instructions provides the guidance to the Bonneville Acquisition Workforce (AWF) by outlining the requirements and processes to be nominated and/or appointed as a warranted Contracting Officer (CO). This authority is generally reserved for AWF members occupying GS-1102-XX Contracting Specialist positions within the Contracts and Strategic Sourcing Organization (NSS).

Note that warrants are not an entitlement. The HCA’s decision to grant warrant authority to an individual must take into consideration the total number of active warrants, their dollar limits, anticipated workload and workload profile (dollar values, numbers of transactions, etc.).

Also, note that a warrant is tied to an employee’s position/organization and is self-canceling upon the employee’s departure or reassignment from that organization.

(a) The authority to negotiate and enter into contracts, in the name of the United States, is given to the Administrator by the Bonneville Project Act. The Administrator has delegated the authority to purchase goods and services to the Head of the Contracting Activity (HCA), with the power of re-delegation. Appointment of individuals to act as Contracting Officers is accomplished by re-delegation of authority by the HCA to individuals as prescribed in Bonneville Policy.

(b) A CO is an individual authorized to contractually bind Bonneville as evidenced by a certificate of appointment issued by the Head of the Contracting Activity (HCA). This Warrant has a requirement for an active BPAC-C and/or FAC-C at the appropriate level (see Appendix 2A). The above requirement for an active contracting certification makes the Warrant self-canceling should the underlying BPAC-C and/or FAC-C expire.

(c) The HCA will review the purchasing manager’s request for appointment as a Contracting Officer, and will approve such qualifications before any individual is authorized to serve as a Contracting Officer. Only those persons who have been delegated Contracting Officer authority in this manner may commit the expenditure of Bonneville funds via the BPI or BFAI.

(d) Any level of Contracting Officer appointment shall not be made without a corresponding contracting certification in either the BPAC-C and/or FAC-C programs as outlined in Attachment 1 of this Appendix.

(e) The HCA will review all Director of Contracts and Strategic Sourcing (NSS) request(s) for an individual appointment as a Contracting Officer, and will approve such qualifications before any individual is authorized to serve as a Contracting Officer. Only those persons who have been delegated Contracting Officer authority in this manner may commit an expenditure of Bonneville funds via contracts and/or agreements covered under the BPI or BFAI respectively.General Information

1.2 COVERAGE

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The qualifications and certifications outlined in this Appendix generally apply to Bonneville Acquisition Workforce (AWF) members in the GS-1102 series. These individuals are involved mainly in the development, execution and administration of contracts and financial assistance instruments for which guidance is outlined in the BPI and BFAI respectively.

1.3 STANDARDS

Bonneville complies with the Office of Personnel Management (OPM) qualifications standards for personnel working in the GS-1102 Contract Specialist and/or Procurement Analyst professional job series. Refer to the OPM standards for detailed information regarding appointment, selections, and qualification and promotion requirements. Personnel in job series GS-1102 grades GS-5 through GS-12 who do not meet the OPM minimum standard may retain their current grades and position if they occupied an equivalent position prior to January 1, 2000 and may advance in the career path to grade GS-12 as deemed appropriate and necessary by Supply Chain Services management.

1.4 EXCLUSIONS

The requirements of this Appendix do not apply to persons who are authorized to execute contracts for the following:

(a) Purchases made under Field Purchase authority (See BPI 2.3.2);

(b) Contracts for purchase, disposal, or lease of all interests in real property and facilities;

(c) Contracts involving power, such as purchase, wheeling, or sale of power, (except power for consumption by Bonneville) purchasing of energy savings, or loans and loan guarantees for the purchasing of power or energy savings;

(d) Commercial utility service purchases by those granted a limited, written delegation by the HCA (See BPI 2.2.2(g) and 11.2);

(e) Purchases made by credit cards.

(f) Order placement or contract modification by Bonneville employees to whom the Contracting Officer has re-delegated specific, limited authority pursuant to the terms of a contract or agreement, whenever such re-delegation is permitted by the BPI. Examples of such re-delegated authority include, but are not limited to, order placement authority pursuant to terms and conditions of an IDIQ contract or blanket purchase agreement; and limited, contract specific authority of a COR or field inspector to make construction contract “field modifications.”

2 CONTRACTING OFFICER NOMINATION AND APPOINTMENT

2.1 CERTIFICATE OF APPOINTMENT (WARRANT)

After a contract specialist has been certified with either a BPAC-C and/or FAC-C at a certain Level and the Contracts & Strategic Sourcing Organization’s (NSS) management has determined a need for Contracting Officer authority, the HCA can appoint an individual as a Contracting Officer by issuance of a "Certificate of Appointment" referred to within this Appendix as a Warrant. The warrant shall state any limitation on the scope of authority, dollar threshold

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and/or other limitations contained in applicable laws or regulations. The Certificate of Appointment shall be prominently displayed in the Contracting Officer's work area.

2.2 INTERIM CERTIFICATE OF APPOINTMENT (WARRANT)

(a) Where the applicant does not meet the minimum qualifications, the HCA may issue an interim certificate based on a documented operational need, which will be valid for no more than twelve (12) months. This interim Warrant will be issued based upon the purchasing manager’s plan for the nominee CO to attain the minimum requirements within the interim period. During this interim period, the CO working under the interim certificate must have their work products reviewed by a Contracting Officer who possesses a warrant of equal or higher dollar limits and categories of authority. The HCA will not issue interim Warrants for unlimited authority; however the HCA retains the discretion to assign interim warrant authority levels to meet Bonneville’s business needs.

(b) When purchasing management affirms in writing to the HCA that the minimum requirements have been met, the HCA can issue an unconditional Certificate of Appointment to replace the interim certificate at the appropriate level.

(c) If the HCA does not receive confirmation that the CO has met the minimum requirements to obtain a permanent unconditional Warrant at the higher authority level(s), the interim Warrant will expire and the CO’s authority will revert to the most recent permanent Warrant (if any).

2.3 CERTIFICATE OF APPOINTEMENT (WARRANT) MINIMUM REQUIREMENTS

In order to be minimally qualified to be nominated and subsequently hold a Contracting Officer Warrant, an individual must have completed:

(a) Minimum experience timeframe for the respective Warrant,

(b) All required training,

(c) Possess required BPAC-C and/or FAC-C for the Warrant level being nominated for; and

(d) All certifications must be valid at the time of appointment (current CLP’s as required).

Any level of Contracting Officer appointment shall not be made without a corresponding contracting certification in either the BPAC-C and/or FAC-C programs as outlined in Attachment 1 of this Appendix.

2.4 PERFORMANCE EVALUATION

(a) When conducting individual performance appraisals, the supervisor shall consider the Contracting Officer's performance of purchasing and administration duties. Satisfactory or better performance is required to maintain a CO Certificate of Appointment. If the performance falls below the satisfactory threshold a Warrant will not be issued, increased and/or otherwise modified and is subject to being suspended and/or rescinded.

(b) Effective June 1, 2011: nominees for CO certification must be on non-probationary status for Bonneville employment purposes as of the date of their certification nomination.

2.5 SUSPENSION OR TERMINATION OF A WARRANT

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(a) The Contracting Officer's Certificate of Appointment may be suspended or terminated by the HCA at any time. Termination of a Contracting Officer Appointment will be by letter, unless the Certificate of Appointment contains other provisions for automatic termination. Reasons for such suspension or termination include, but are not limited to:

(1) Failure to comply with applicable certification requirements, Statutes, Bonneville Purchasing Instruction guidelines, or delegated responsibilities.

(2) Failure to maintain required training standards after appointment. (3) Violation of a material portion of Appendix 3A, Standards of Conduct Regarding

Purchasing and Assistance. (4) The supervisor indicates that the need for a Contracting Officer no longer exists. (5) Reassignment of the appointee to a position where the need for the authority does

not exist. (6) Retirement, resignation, or other termination of the appointee's employment. (7) At the request of the CO’s supervisor or second level manager, for reasons such as

but not limited to: less than satisfactory performance as considered during a management and employee performance appraisal, or temporary reassignment to other duties that do not require a CO Certificate of Appointment.

(b) It is the responsibility of the Contracts and Strategic Sourcing Organization to inform the HCA of performance and/or other issues in writing to aid in the determination. Additionally, on the recommendation of the Director of Supply Chain and Strategic Sourcing, a Warrant can be suspended and/or rescinded for any of the reasons outlined above.

2.6 CONTRACTING OFFICER FILES

The HCA maintains properly secured files on each Contracting Officer that include all information submitted and considered for initial appointment as a CO, plus all supplemental information received for a change or increase in authority.

2.7 DOCUMENTATION

(a) The Supply Chain Services organization will maintain the files necessary to verify purchasing experience and training requirements education for each individual who is certified at Level, I, II, or III. The HCA may request to review these files when considering requests for appointment as a Contracting Officer.

(b) Nominations for a Contracting Officer Certificate of Appointment (warrant) shall be prepared by the performance manager, reviewed and approved by both the second level manager of the nominee senior business process or procurement analyst (or designee), in accordance with the format shown in Exhibit 2-A-1, Request for Appointment As A Contracting Officer.

2.8 CATEGORIES OF CONTRACTING WARRANT AUTHORITY

Contracting authority is limited to what is needed by the Contracting Officer to operate effectively during a specific assignment. For example, only those Contracting Officers who need construction contracting authority will be granted such authority. When contracting authority is being requested, the category of authority required shall be clearly stated in the nomination request. The specific and customary categories of delegated authority are:

Supplies and Services Construction Financial Assistance Orders Against Existing Bonneville and FSS Schedules

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2.9 SPECIAL TRAINING REQUIREMENTS

Occasionally some limited authorities are required for specialized types of contracts. This section outlines those specializations and the additional requirements to qualify for that authority. Specifically to Construction and Financial Assistance type Warrants, the following are requirements that shall be fulfilled before requesting and/or begin granted the specific type warrant unless waived by the HCA.

(a) Construction Warrant: In additional to the standard educational requirements for Level I, II or III Certification and commensurate warrant authority, the nominee must have obtained at least 40 hours of training in construction contracting.

(b) Financial Assistance Warrant: Effective December 21, 2012, in addition to the standard educational requirements for Level I, II or III Certification and commensurate warrant authority, the nominee must have obtained at least 40 hours of training in financial assistance.

2.10 REQUIRED LENGTH OF EXPERIENCE

The table in Attachment 2A-1 in this Appendix defines the minimum required length of relevant working experience at various Certification Levels and corresponding eligibility for warrant authority. Length of Experience assessments are subject to BPI 2.2(i).

2.11 DOLLAR LIMITATIONS ON CONTRACTING WARRANT AUTHORITY

(a) Contracting authority is also defined by dollar amount. The dollar amount of delegated authority is dependent upon the qualifications of the nominee Contracting Officer, as well as the needs of a specific position assignment as determined by the purchasing managers. The dollar amount of authority requested shall be clearly stated in the memorandum nominating the Contracting Officer. The specific dollar amounts of authority for each certification level are shown in Attachment 2B-1 in this Appendix and are effective as of November 1, 2015.

(b) Nominees requesting unlimited certificates of appointments may be requested to present a portfolio of work products to the HCA to affirm proficiency and competency.

2.12 WAIVERS AND INTERIM WARRANTS

A request for waiver from specific requirements mentioned in this Appendix may be submitted for consideration by the HCA. Such requests shall be made in the memorandum nominating the Contracting Officer (Attachment 2B-3) and must specify the requirements not met and the plans for meeting them. If the HCA approves the request, an interim certificate will be issued as described in 2.2 above.

2.13 PREPARATION OF THE WARRANT NOMINATION

(a) Prior to submitting a request for Contracting Officer Authority, Supply Chain management should consider several factors:

(1) Dollar value of typical contract (2) Type of contracts to be involved (3) Frequency and number of anticipated contracts (4) Impact of contracting officer responsibilities on the nominee's program

responsibilities

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(5) An affirmative determination that the nominee meets the OPM qualification standards for the position and is not on probationary status as a Bonneville employee.

(b) If consideration of all of these factors results in the decision to request Contracting Officer Authority, the steps outlined below shall be followed. The Contracts and Strategic Sourcing Organization management shall:

(1) Determine the category/type of authority required to handle the majority of the anticipated workload.

(2) Determine the dollar amount of authority required to handle the majority of the anticipated workload (see Attachment 2B-1).

(3) Determine whether the Contracting Officer nominee is qualified per the CO Qualification Standard, (see section 2.3). If he or she is not fully qualified, an interim certificate may be requested (see section 2.2).

(4) If an interim certificate is requested, and the nominee and management anticipate requesting a subsequent unconditional Certificate of Appointment, the nominee and immediate supervisor should jointly develop a plan to bring the nominee's qualifications up to the required standard within one year. This plan, which may be all or part of the nominee’s Individual Development Plan, shall accompany the nomination.

(5) Prepare and sign the Request for Appointment memo according to the notes and instructions in Attachment 2B-3.

(6) If this is the first request for Contracting Officer Authority, the nominee must complete a Confidential Financial Disclosure Report (OGE Form 450.0) and submit it to Bonneville Office of General Counsel (OGC). The nominee will receive all future disclosure forms from OGC and must return them to OGC. Do not send the disclosure report to the HCA.

(7) The HCA shall review the request for appointment and may request to review the supporting documentation prior to approval. The HCA will notify the Director of Contracts and Strategic Sourcing of the decision.

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Attachment 2B-1 – Contracting Officer Warrant Levels & Minimum Requirements

Contracting Officer Warrant Levels

Level Construction Services/Supplies Grants & Agreements

Ordering Against

Established Instruments

6 Unlimited Unlimited Unlimited Unlimited

5 $250,000,000.00 $250,000,000.00 $250,000,000.00 $250,000,000.00

4 $75,000,000.00 $75,000,000.00 $75,000,000.00 $100,000,000.00

3 $15,000,000.00 $15,000,000.00 $15,000,000.00 $50,000,000.00

2 $5,000,000.00 $2,500,000.00 $2,500,000.00 $10,000,000.00

1 $150,000.00 $150,000.00 $500,000.00 $500,000.00

NOMINAL $0.00 $10,000.00 $0.00 $10,000.00

Minimum Requirements

Warrant Level

Minimum Years of Contracting Experience

Minimum BPAC-C and/or FAC-C (Must be current)

Nominal 1 Year of General Experience and any GS Occupational Series

N/A***

1 GS-1102 Series & 1 year Contracting Experience I

2 GS-1102 Series & 2 years Contracting Experience 3 II

4 GS-1102 Series & 4 years Contracting

Experience 5 III

6 *Must complete 40 hours of specific Construction Training before eligible for this Warrant type. **Must complete 40 hours of specific Grants and Agreements Training before eligible for this Warrant type. ***Must complete Intro to BPI and CON 100 Training courses in order to be eligible for a Nominal Warrant.

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Attachment 2B-2 – Contracting Officer Warrant Sample

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Attachment 2B-3 – Warrant Request Letter and Form

41


42



StandardsofConductRegardingPurchasingand

AssistanceBPIAppendix3


44


1 General Principles ............................................................................................................... 45

2 Definitions ............................................................................................................................ 46

3 Conduct of Purchasing and Assistance Activities ................................................................ 48

4 Unauthorized Receipt of Information ................................................................................... 48

5 Annual Certification by BPA Employees .............................................................................. 49

6 Disqualification ..................................................................................................................... 49

7 Processing Violations or Possible Violations ....................................................................... 50

8 Questions Regarding Standards of Conduct ....................................................................... 50

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1 GENERAL PRINCIPLES It is Bonneville Power Administration policy that all purchasing and financial assistance activities shall be conducted in a manner that complies with the ethical standards of conduct for employees of the Executive Branch, including those specific to DOE, as supplemented by BPI 3.1 and this Appendix. All Bonneville employees who are personally and substantially involved in purchasing and assistance activities, not just purchasing and assistance personnel, must clearly understand the scope of ethical standards which must be met. This appendix is not, however, a definitive discussion of all possible ethical dilemmas and the proper course of action to be taken in a given instance. Except for questions regarding standards of conduct regarding purchasing and assistance activities, the Agency Ethics Official in General Counsel is responsible for advising employees regarding standards of conduct and should be contacted immediately whenever questions arise.

The following general “Principles of Ethical Conduct, included in Executive Order 12674 of April 12, 1989 (as modified by E.O. 12731) apply to every employees and form the basis for the standards of conduct. Where a situation is not covered specifically by a rule, employees shall apply these principles in determining whether their conduct is proper and/or the situation should be discussed with the Agency Ethics Official.

(a) Public service is a public trust, requiring employees to place loyalty to the Constitution, the laws, and ethical principles above private gain.

(b) Employees shall not hold financial interests that conflict with the conscientious performance of their duties.

(c) Employees shall not engage in financial transactions using nonpublic Government information or allow the improper use of such information to further any private interest.

(d) An employee shall not, except as permitted, solicit or accept any gift or other item of monetary value from any person or entity seeking official action from, doing business with, or conducting activities regulated by the employee's agency, or whose interests may be substantially affected by the performance or nonperformance of the employee's duties.

(e) Employees shall put forth honest effort in the performance of their duties.

(f) Employees shall not knowingly make unauthorized commitments or promises of any kind purporting to bind Bonneville Power Administration.

(g) Employees shall not use public office for private gain.

(h) Employees shall act impartially and not give preferential treatment to any private organization or individual.

(i) Employees shall protect and conserve Federal property and shall not use it for other than authorized activities.

(j) Employees shall not engage in outside employment or activities, including seeking or negotiating for employment, that conflict with official Government duties and responsibilities.

(k) Employees shall disclose waste, fraud, abuse, and corruption to appropriate authorities.

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(l) Employees shall satisfy in good faith their obligations as citizens, including all just financial

obligations, especially those such as Federal, State, or local taxes, that are imposed by law.

(m) Employees shall adhere to all laws and regulations that provide equal opportunity for all Americans regardless of race, color, religion, sex, national origin, age, or handicap.

(n) Employees shall endeavor to avoid any actions creating the appearance that they are violating the law or the ethical standards. Whether particular circumstances create an appearance that the law or these standards have been violated shall be determined from the perspective of a reasonable person with knowledge of the relevant facts.

2 DEFINITIONS Bonneville assistance or financial assistance means any form of assistance instrument where the principle purpose of the relationship is the transfer of money, property, services or anything of value to a recipient in order to accomplish a public purpose of support or stimulation authorized by Federal statute rather than of acquisition by purchase, lease, or barter, of property or services for the direct benefit or use of Bonneville Power Administration. Specific types of financial assistance instruments include, but are not limited to grants, cooperative agreements, and loans (see Bonneville Financial Assistance Instructions).

Bonneville purchase means the procedures to solicit and award a contract by Bonneville Power Administration of supplies or services (including construction).

Compensation means wages, salaries, honoraria, commissions, professional fees, and any other form of compensation, provided directly or indirectly for services rendered. Compensation is indirectly provided if it is paid to an entity other than the individual, specifically in exchange for services provided by the individual.

Contractor proposal information means any information submitted to Bonneville Power Administration as part of or in connection with a proposal to enter into a Bonneville purchase of property or services (including construction) or assistance, if that information has not been previously made available to the public or disclosed publicly, including:

(1) Cost or pricing data; (2) Indirect costs and direct labor rates; (3) Proprietary information about manufacturing processes, operations, or techniques

marked by the contractor in accordance with applicable law or regulation.

Competing contractor, with respect to any purchase means any entity legally capable of entering into a contract that is, or is reasonably likely to become, a competitor for or recipient of a Bonneville Power Administration contract under such purchase, and includes any other person acting on behalf of such an entity.

Participating personally and substantially during the conduct of a Bonneville purchase means active and significant involvement of an individual in any activity directly related to a purchase or assistance, beginning upon the earliest date upon which an authorized Bonneville Power Administration official orders commencement of such activities, and ending upon award of a contract; and

(a) Activities directly related to a purchase or assistance include:

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(1) Drafting, reviewing, or approving the specification or statement of work for the purchase or assistance;

(2) Preparing or developing the solicitation; (3) Evaluating proposals or selecting a source; (4) Negotiating price or terms and conditions of the contract; and (5) Reviewing and approving the award of the contract.

(b) Generally, an individual will not be considered to have participated personally and

substantially in a purchase or assistance activity solely by participating in the following activities: (1) Bonneville-wide or Business Line boards, panels, or other advisory committees that

review program milestones or evaluate and make recommendations regarding alternative technologies or approaches for satisfying broad agency level missions or objectives;

(2) The performance of general, technical, engineering, or scientific effort having broad application not directly associated with a particular purchase, notwithstanding that such general, technical, engineering, or scientific effort subsequently may be incorporated into a particular purchase or assistance;

(3) Clerical functions supporting the conduct of a particular purchase or assistance; and (4) For purchases to be conducted under the procedures of OMB Circular A-76,

participation in management studies, preparation of in-house cost estimates, preparation of "most efficient organization" analyses, and furnishing of data or technical support to be used by others in the development of performance standards, statements of work, or specifications.

Participating personally means participating directly, and includes the direct and active supervision of a subordinate's participation in the matter.

Participating substantially means that the employee's involvement is of significance to the matter. Substantial participation requires more than official responsibility, knowledge, perfunctory involvement, or involvement on an administrative or peripheral issue. Participation may be substantial even though it is not determinative of the outcome of a particular matter. A finding of substantiality should be based not only on the effort devoted to a matter, but also on the importance of the effort or on the degree of the employee’s influence on the outcome. While a series of peripheral involvements may be insubstantial, the single act of approving or participating in a critical step may be substantial. However, the review of purchase documents solely to determine compliance with regulatory, administrative, or budgetary procedures, does not constitute substantial participation in a purchase.

Proprietary information means: (1) Information contained in a proposal; (2) Cost or pricing data; (3) Any other information submitted to Bonneville Power Administration by a contractor and

designated as proprietary.

Source selection information means information which is prepared or developed for use by Bonneville Power Administration to conduct a particular purchase or assistance, and--

(a) The disclosure of which to a competing contractor would jeopardize the integrity or successful completion of the purchase or assistance concerned, such as: (1) Proposed costs or prices submitted in response to a Bonneville Power Administration

solicitation or lists of those proposed costs or prices;

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(2) Source selection plans; (3) Evaluation plans; (4) Technical evaluation of proposals; (5) Cost or price evaluations of proposals; (6) Rankings of proposals or competitors; (7) The reports and evaluations of source selection teams; (8) Other information marked as "SOURCE SELECTION INFORMATION."

(b) The originator of information designated as source selection information may mark the cover

page and each page that contains such information with the legend, "SOURCE SELECTION INFORMATION." The material listed in (a)(1)-(8) above is considered to be source selection information whether or not marked, and/or;

(c) Which is required by statute, regulation, or order to be secured in a source selection file or other restricted facility to prevent such disclosure.

3 CONDUCT OF PURCHASING AND ASSISTANCE ACTIVITIES (a) Bonneville purchasing and assistance activities shall be conducted in a manner above

reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none. The general rule is to maintain the integrity of purchasing and assistance practices, strictly avoiding any conflict of interest or even the appearance of a conflict of interest in Bonneville-contractor relationships. Employees' conduct must be such that they would not hesitate to make full public disclosure of their actions at any time.

(b) During the conduct of any Bonneville purchase or financial assistance activity, no Bonneville Power Administration employee who participates personally and substantially during its conduct shall knowingly:

(1) Solicit or accept, directly or indirectly, any promise of future employment or business opportunity from, or engage, directly or indirectly, in any discussion of future employment or business opportunity with a competing contractor, except as provided in BPI 3.1.4 (also see Section 6 of this appendix);

(2) Ask for, demand, exact, solicit, seek, accept, receive, or agree to receive, directly or indirectly, any compensation, gratuity, or other thing of value from any competing contractor for such purchase; or

(3) Disclose any contractor proposal information or source selection information regarding such purchase directly or indirectly to any person other than a person authorized by the CO to receive such information.

4 UNAUTHORIZED RECEIPT OF INFORMATION During the conduct of any Bonneville purchase or assistance activity, any person other than those authorized by the CO to receive such information shall not, other than as provided by law, knowingly obtain contractor proposal information or source selection information before the award of a Bonneville Power Administration contract to which the purchase information relates.

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5 ANNUAL CERTIFICATION BY BPA EMPLOYEES The Head of the Contracting Activity (HCA) is responsible for standards of conduct regarding Bonneville purchasing and assistance activities. Employees who are personally and substantially involved in Bonneville purchasing and assistance activities must, each year, familiarize themselves with these purchasing and assistance standards of conduct and BPI 3.1.

In coordination with General Counsel, the HCA relies upon the annual certification by all Bonneville Power Administration employees regarding ethical standards of conduct for employees of the Executive Branch (5 C.F.R. Part 2635, as well as those specific to DOE included in 5 C.F.R. Part 3301 and 10 C.F.R. Part 1010 and 48 C.F.R. Subpart 903.1, as supplemented by this BPI Appendix 3 and BPI Subpart 3.1) as the basis for Bonneville Power Administration employee certification of standards of conduct for purchasing and financial assistance activities of Bonneville Power Administration. Therefore, the HCA will not maintain separate annual certifications for standards of conduct regarding purchasing and assistance, relying instead upon the annual ethics briefing and certifications maintained by General Counsel.

The standards of conduct regarding purchasing and assistance specifically applies to Bonneville Power Administration employees, as follows:

(a) All GS-1101, 1102, 1105, and GS-1106 series employees;

(b) All employees delegated contracting officer authority that are not included in category (a) above;

(c) All CORs and Field Inspectors; (d) All Purchase cardholders with single purchase limits above $3,500; and

(e) All employees who “participate personally and substantially in the conduct of a

Bonneville purchase,” as defined in Section 2 of this appendix.

6 DISQUALIFICATION (a) A Bonneville Power Administration employee who wishes to discuss future employment

or business opportunities with a competing contractor must undertake measures to recuse (withdraw) himself/herself from the conduct of the purchase or assistance activity. Such employee must submit to the HCA, prior to initiating or engaging in such discussions, a written proposal of disqualification from further participation in the purchase which relates to that competing contractor (see BPI 3.1.4). The proposal shall: (1) Identify the purchase involved; (2) Describe the nature of the employee’s participation in the purchase and specify the

approximate dates or time period of participation; and (3) Identify the competing contractor and describe its interest in the purchase.

(b) If the HCA determines that the employee’s further participation is not essential to the

activity's conduct of the purchase and that disqualification will not jeopardize the integrity of the purchasing process, the HCA may grant written approval of the disqualification proposal.

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7 PROCESSING VIOLATIONS OR POSSIBLE VIOLATIONS (a) Any person who receives or obtains information of a violation of the purchasing and

assistance standards of conduct must promptly report such information to the CO. The CO is responsible for determining whether the reported violation has any impact on the pending award or selection of the source.

(b) If the CO concludes that there is no impact on the purchase, the CO shall discuss that conclusion with his/her First Level performance manager. With the concurrence of that individual, the CO may, without further approval, proceed with the purchase. However, whenever the First Level performance manager does not agree with that conclusion, he or she shall advise the CO to withhold award and shall promptly forward the information and documentation to the HCA.

(c) The HCA upon receiving any information describing a violation (per BPI 3.1) shall review all

information available and take appropriate action. If the HCA determines that award is justified by urgent and compelling circumstances, or is otherwise in the interests of Bonneville Power Administration, the contracting officer may be authorized to award the contract.

8 QUESTIONS REGARDING STANDARDS OF CONDUCT (a) Other than the HCA procedures in Section 6 and 7 of this appendix (BPI subsections 3.1.4

and 3.1.5, respectively), should any Bonneville Power Administration employee, in his or her judgement, be confronted with any situation where a violation of ethical standards of conduct and business practices is an issue, such person needs to review the standards of conduct and seek the advice of the Agency Ethics Official in General Counsel, as necessary.

(b) In addition to the standards of ethical conduct set forth in this appendix, there are various statutes that must be taken into consideration in determining whether conduct is proper. Employees are further cautioned that there may be additional statutory and regulatory restrictions applicable to them generally, or as employees of DOE. Because an employee is considered to be on notice of the requirements of any statute, an employee should not rely upon any description or synopsis of a statutory restriction such as this one. Instead the employee should refer to the statute itself and obtain the advice of the Agency Ethics Official as needed. In many cases, disciplinary action for violating an ethics regulation will not be taken against an employee who has engaged in conduct in good faith reliance upon the advice of an agency ethics official, provided that the employee, in seeking such advice, has made full disclosure of all relevant circumstances. Disclosures made by an employee to an agency ethics official are not protected by an attorney-client privilege.


HowtoSubmitanUnsolicitedProposal

BPIAppendix12


52


Table of Contents

1 Introduction .......................................................................................................................... 53

2 What is an “Unsolicited Proposal”? ...................................................................................... 53

3 Preliminary Discussions ....................................................................................................... 53

4 Where to Submit .................................................................................................................. 54

5 What to Submit .................................................................................................................... 54

6 How Bonneville Evaluates your Proposal ............................................................................ 55

7 Other Considerations ........................................................................................................... 56

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1 INTRODUCTION (a) Bonneville Power Administration (Bonneville) encourages submission of unsolicited

proposal which offer unique or particularly innovative ideas which support Bonneville’s mission. Proposals may be for research, investigations, projects, or products. If the proposal is accepted, Bonneville may award a contract, grant, or cooperative agreement to the proposer.

(b) This guide is for anyone interested in submitting such “unsolicited proposals.” If describes the procedure for preparing and submitting an unsolicited proposal. It also describes the process Bonneville uses to evaluate the proposal.

2 WHAT IS AN “UNSOLICITED PROPOSAL”? (a) An unsolicited proposal is a written proposal submitted by an offeror:

(1) Which was not submitted in response to a known Bonneville requirement (i.e., where Bonneville is not already planning to purchase the type of supply or service offered in the unsolicited proposal), and

(2) Which was not solicited by BPA (however, Bonneville encourages preliminary discussions - See Section 3).

(b) The following are not considered to be unsolicited proposals:

(1) Advertising materials (2) Commercial product offerings

(c) An unsolicited proposal can only be accepted by BPA if it meets all of the following criteria: (1) The offered goods or services may not be within the scope of a pending BPA

solicitation (i.e., where BPA is already planning to purchase the type of s upply or service offered in the unsolicited proposal.)

(2) The proposal must be unique, the proposer must propose a particularly innovative idea which was originated by them, or the proposer must have unique qualifications. The proposal cannot be accepted if it contains an approach which is available to Bonneville without restriction from another source, or is commercially available from more than one source.

(3) The proposal's basic concept must support Bonneville 's mission and b e acceptable, both technically and from a budget standpoint, to:

(i) Bonneville 's technical/program staff (referred to as a "subject matter specialist"), and

(ii) Bonneville 's Contracting Officer. (4) Potential conflicts of interest, if any, must be resolved.

3 PRELIMINARY DISCUSSIONS Bonneville encourages you to make preliminary contact with Bonneville’s subject matter specialists before preparing a detailed unsolicited proposal. Preliminary contact promotes understanding between the proposer and Bonneville, and reduces paperwork and loss of time.

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For assistance in locating the appropriate Bonneville subject matter specialist, contract Bonneville’s Supply Chain Services’ Small Business Specialist (see Section 4).

4 WHERE TO SUBMIT Submit your proposal to [email protected].

This email address is Bonneville’s clearinghouse for the receipt, distribution, accountability, and status reporting of unsolicited proposals. All proposals received are assigned a Bonneville identification number, and acknowledged in writing to the originator of the proposal. The Bonneville identification number appears in the acknowledgement letter, and should be referenced in all subsequent communications pertaining to the proposal.

5 WHAT TO SUBMIT Proposals should be succinct, but sufficiently detailed to allow for an adequate analysis of the costs and benefits. There is no required format. Your proposal should cover the following points, if applicable:

(a) BASIC INFORMATION – See Exhibit 12-A-1

(b) TECHNICAL INFORMATION (1) A title and an abstract of the proposed project. The abstract should be in language that

can be understood by an intelligent layperson. The abstract is the reviewer’s introduction to the proposed project.

(2) Explain why the proposal is either particularly innovative, or why the proposer in uniquely qualified to perform the project (capabilities, experience, facilities, techniques, etc.)

(3) A detailed workplace. The objectives, phase-by-phase procedures to be followed and expected results and their significance. The general approach should be outlined, and specific methods and procedures to be used should be adequately described. A list of tasks and a proposed schedule with intermediate completion dates should be included. It is understood that detailed plans may require modification during negotiation or the course of the project.

(4) Available facilities and major items of equipment especially adapted or suited to the proposed project should be described, with a clear statement of who will provide such items and/or equipment.

(5) Names of proposer’s key project personnel, including the project leader, along with brief biographical information on each.

(6) Economic assumptions, cost, and technical analysis methodologies. All assumptions used in economic and technical analyses should be explicitly stated, references to support all numerical values and cost assumptions should be cited, and sample calculations and equations used to derive economic results should be provided. Claims made about your ideas or proposed technology must be substantiated or verified by calculations and suitable references.

(c) BUSINESS AND FINANCIAL INFORMATION

(1) State whether you propose to be paid on a firm-fixed price basis, time-and-materials or labor-hour basis, or cost reimbursement basis.

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(2) Submit a detailed cost estimate. Exhibit 12-A-2 may be used for this purpose, or you may use a different format which provides the same level of detail. You may contact the Small Business Specialist to have this fillable form e-mailed to you. Where a cost-sharing arrangement is proposed, each share should be separately identified and similarly detailed.

(3) Provide a brochure describing your organization, if available. (4) Include a brief description of your facilities, if they will be used to perform the project. (5) If you represent an educational institution, state whether you wish to establish stipulated

salary support amounts as the basis for charges for personal services of any professional staff members to be used on the project. If you wish to establish such stipulated salary support amounts, the proposal should include the following information for each professional staff member:

(i) Academic year salary; (ii) Other research projects or proposal for which salary is allocated; and (iii) Any other duties, such as teaching assignments, administrative assignments,

supervision of graduate students, or other institutional activities. (6) Include evidence of your financial ability to complete the project.

See Exhibit 12-A-3 for a checklist which may be helpful to ensure that you haven’t forgotten any required information.

6 HOW BONNEVILLE EVALUATES YOUR PROPOSAL (a) The Supply Chain Services organization serves as a clearinghouse for all unsolicited

proposals received by Bonneville. This office will notify you that they have received your proposal, and will send copies to the subject matter specialist(s) and Contracting Officer.

(b) The time required for evaluation, negotiation, and a final decision may take three (3) months, but will vary depending on the particular circumstances of the project.

(c) Your proposal will be used only for purposes of evaluation. Bonneville will treat your

proposal confidentially, with the exception of: (1) Information which is incorporated into the final award, unless specifically excepted; (2) Information available under the Freedom of Information Act; (3) Information required by a court of law or another Federal agency; and (4) Information publicly available from other sources.

(d) Bear in mind that a proposal may be rejected if there are significant omissions or deficiencies in the Basic Information, Technical Information, or Business and Financial Information categories outlined in Section 5, above.

(e) The subject matter specialist and Contracting Officer will review the unsolicited proposal to determine whether it meets the criteria shown in Section 2, above. Proposals which do not meet these criteria will either be declined without further consideration, or competitively negotiated along with other qualified contractors. Copies of unsolicited proposals which have been declined will not normally be returned, except upon the written request of the submitter.

(f) If your proposal meets the criteria shown in Section 2, above, the contracting officer and subject matter specialist will contact you and negotiate details and other terms and

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conditions. Determination of the appropriate award instrument (purchasing or power contract, grant, or cooperative agreement) will be made at this time. No commitment of funds may be made by the proposer until formal award is made. Bonneville may discontinue negotiations at any time prior to award and is under no obligation to pay proposers any costs of preparation or negotiation.

7 OTHER CONSIDERATIONS (a) Reports. Bonneville will generally negotiate reporting requirements prior to award. The

reports required will depend upon the needs of Bonneville and the particular circumstances of the project. The contractor will be required to submit a satisfactory final report of the work.

(b) Release of Information. Bonneville recognizes that, during the course of the project, the contractor may desire to publish information regarding scientific or technical developments made in the course of the project. BPA may require advance approval or otherwise restrict the release or publication of information regarding the project.

(c) Data and Patent Rights. Bonneville may establish data and copyrights to awards which

result from unsolicited proposals. BPA’s policy regarding patents is to grant the contractor title to the patens made in whole or in part with Bonneville funds. In exchange, Bonneville receives royalty-free use on behalf of itself and other Federal agencies. The specific terms and conditions regarding patents, data, and copyrights will be negotiated for each proposal.

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Exhibit 12-A-1 – COVER PAGE FORMAT

UNSOLICTED PROPOSAL SUBMITTED TO THE BONNEVILLE POWER ADMINISTRATION

Name of Institution, Organization, Individual

Mailing Address

City, State, Zip

For: [Title of Proposal]

Brief Description ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Name(s) of Bonneville Personnel with Whom the Proposer has had Preliminary Discussions on the Proposed Work:_____________________________________________________________

Requested Starting Date: ____________________________

Proposed Duration: _________________________________

Total Cost of Proposal: _____________________________

Amount Requested From Bonneville: _______________________

If Renewal, Give Contract or Grant Number: _____________

Small Business _____ Minority ______ Profit _______ Nonprofit ________

Educational ________ Other: ______________________________________________

Principal Investigator: ___________________________________ Phone: ________________

Business Contact: _____________________________________ Phone: ________________

Date of Submission ________________________________

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Exhibit 12-A-2 – PRICE/COST PROPOSAL

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EXHIBIT 12-A-3 – CHECKLIST FOR PROPOSAL SUBMISSION

1. BASIC INFORMATION, including information required by Exhibit 12-A-1

2. TECHNICAL INFORMATION

A. Abstract of the proposed project.

B. Explanation of the project's innovative aspects or proposer's unique qualifications.

C. A detailed work plan.

D. Facilities and Equipment.

E. Key project personnel.

F. Economic assumptions, cost, and technical analysis methodologies.

3. BUSINESS AND FINANCIAL INFORMATION

A. State whether you propose to be paid on a firm fixed price basis, time and materials basis, or cost reimbursement basis.

B. Detailed cost estimate.

C. Organizational brochure, if available.

D. Description of your facilities, if they will be used to perform the project.

E. Salary support arrangements and details (education institutions.)

F. Evidence of financial ability to complete the project.


ContractCostPrinciplesforCommercialOrganizations

BPIAppendix13


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Table of Contents

1 Advance Agreements .......................................................................................................... 63

2 Contracts with Commercial Organizations ........................................................................... 63

3 Construction and Architect-Engineer Contracts ................................................................... 63

4 Composition of Total Cost ................................................................................................... 65

4.1 Determination of Allowability ........................................................................................ 65

4.2 Determining Reasonableness ...................................................................................... 65

4.3 Determination of Allocability ......................................................................................... 66

4.4 Credits .......................................................................................................................... 66

5 Direct Costs ......................................................................................................................... 66

6 Indirect Costs ....................................................................................................................... 66

7 Application of Principles and Procedures ............................................................................ 67

8 Selected Costs ..................................................................................................................... 68

8.1 Public Relations and Advertising Costs ........................................................................ 68

8.2 Automatic Data Processing Equipment Leasing Costs ................................................ 69

8.3 Bad Debts ..................................................................................................................... 71

8.4 Bonding Costs .............................................................................................................. 71

8.5 Civil Defense Costs ...................................................................................................... 71

8.6 Compensation for Persoanl Services ........................................................................... 71

8.7 Contingencies ............................................................................................................... 82

8.8 Contributions or Donations ........................................................................................... 82

8.9 [Reserved] .................................................................................................................... 82

8.10 Cost of Money .............................................................................................................. 83

8.11 Depreciation ................................................................................................................. 83

8.12 Economic Planning Costs ............................................................................................. 85

8.13 Employee Morale and Similar Costs ............................................................................ 85

8.14 Entertainment Costs ..................................................................................................... 86

8.15 Fines, Penalties, and Mischarging Costs ..................................................................... 86

8.16 Gains and Losses on Disposition of Depreciable Property .......................................... 87

8.17 Idle Facilities and idle Capacity Costs .......................................................................... 88

8.18 Independent R and D Bid and Proposal Costs ............................................................. 88

8.19 Insurance and Indemnification ...................................................................................... 90

8.20 Interest and Other Financial Costs ............................................................................... 91

8.21 Labor Relations Costs .................................................................................................. 91

8.22 Lobbying and Political Activity Costs ............................................................................ 92

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8.23 Losses on Other Contracts ........................................................................................... 93

8.24 Maintenance and Repair Costs .................................................................................... 93

8.25 Manufacturing and Production Engineering Costs ....................................................... 93

8.26 Material Costs ............................................................................................................... 93

8.27 Organizational Costs .................................................................................................... 94

8.28 Other Business Expenses ............................................................................................ 95

8.29 Plant Protection Costs .................................................................................................. 95

8.30 Patent Costs ................................................................................................................. 95

8.31 [Reserved] .................................................................................................................... 96

8.32 Precontract Costs ......................................................................................................... 96

8.33 Professional and Consultant Service Costs ................................................................. 96

8.34 Recruitment Costs ........................................................................................................ 97

8.35 Relocation Costs .......................................................................................................... 98

8.36 Rental Costs ............................................................................................................... 100

8.37 Royalties and Other Costs for Use of Patents ............................................................ 100

8.38 Selling Costs ............................................................................................................... 101

8.39 Service and Warranty Costs ....................................................................................... 102

8.40 Special Tooling and Special Test Equipment Costs ................................................... 102

8.41 Taxes .......................................................................................................................... 102

8.42 Termination Costs ...................................................................................................... 103

8.43 Trade, Business, Technical, and Professional Activity Costs ..................................... 105

8.44 Training and Education Costs .................................................................................... 105

8.45 Transportation Costs .................................................................................................. 107

8.46 Travel Costs ............................................................................................................... 107

8.47 Defense of Fraud Proceedings ................................................................................... 109

8.48 Defferred Research and Development Costs ............................................................. 111

8.49 Goodwill ...................................................................................................................... 112

8.50 [Reserved] .................................................................................................................. 112

8.51 Cost of Alcoholic Beverages ....................................................................................... 112

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1 ADVANCE AGREEMENTS (a) The extent of Allowability of the costs covered in this Section applies broadly to many

accounting systems in varying contract situations. Thus, the reasonableness and allocability of certain costs may be difficult to determine, particularly for firms or their divisions that may not be under effective competitive restraints. To avoid possible subsequent disallowance or dispute based on unreasonableness or nonallocability, COs and contractors should seek advance agreement on the treatment of special or unusual costs. However, an advance agreement is not an absolute requirement, and the absence of an advance agreement on any cost will not, in itself, affect reasonableness or allocability of that cost.

(b) Advance agreements may be negotiated either before or during a contract but should be negotiated before incurrence of the costs involved. The agreements must be in writing, executed by both contracting parties, and incorporated into applicable current and future contracts. An advance agreement shall contain a statement of its applicability and duration.

(c) The CO is not authorized to agree to a treatment of costs inconsistent with this Appendix.

For example, an advance agreement may not provide that, notwithstanding subpart 8.20, interest allowable.

(d) Advance agreements may be negotiated with a particular contractor for a single contract or

a group of contracts.

2 CONTRACTS WITH COMMERCIAL ORGANIZATIONS This category includes all contracts and contract modifications for supplies, services, or experimental, developmental, or research work negotiated on the basis of cost with organizations other than educational institutions, State and local governments and nonprofit organizations.

(a) The cost principles and procedures in this Appendix shall be used in pricing contracts and contract modifications with commercial organizations whenever cost analysis is performed.

(b) In addition, the CO shall incorporate these cost principles and procedures by reference in contracts with commercial organizations as the basis for – (1) Determining reimbursable costs under cost-reimbursement contracts and cost-

reimbursement subcontracts under these contracts performed by commercial organizations, and the cost- reimbursement portion of time-and-materials contracts, except when material is priced on a basis other than at cost;

(2) Negotiating indirect cost rates; (3) Proposing, negotiating or determining costs under terminated contracts; (4) Price revision of fixed-price incentive contracts; (5) Price redetermination of price redetermination contracts; and (6) Pricing changes and other contract modifications.

3 CONSTRUCTION AND ARCHITECT-ENGINEER CONTRACTS Except as otherwise provided in this paragraph, the allowability of costs for construction and architect-engineer contracts shall be determined in accordance with this Appendix.

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(a) Because of widely varying factors such as the nature, size, duration, and location of the construction site, advance agreements under Section 1 for such items as home office overhead, partners' compensation, employment of consultants, and equipment usage costs are particularly important in construction and architect-engineer contracts. When appropriate they serve to express the parties' understanding and to avoid subsequent disputes or disallowances.

(b) "Construction equipment," as used in this section, means equipment (including marine equipment) in sound workable condition, either owned or controlled by the contractor, or by the subcontractor at any tier, or obtained from a commercial rental source, and furnished for its use under Bonneville contracts. (1) Allowable ownership and operating costs shall be determined as follows:

(i) Actual cost data shall be used when such data can be determined for both ownership and operating costs for each piece of equipment, or groups of similar serial or series equipment, from the contractor's accounting records. When such costs cannot be so determined, Bonneville may specify the use of a particular schedule of predetermined rates or any part thereof to determine ownership and operating costs of construction equipment (see subdivisions (b)(1)(ii) and (1)(iii) below). However, costs otherwise unallowable under this Section shall not become allowable through the use of any schedule (see ( 1)(iii)). For example, schedules need to be adjusted for contract costing purposes if they are based on replacement cost, include unallowable interest costs, or use improper cost of money rates or computations. COs should review the computations and factors included within the specified schedule and ensure that unallowable or unacceptably computed factors are not included in cost submissions.

(ii) Predetermined schedules of construction equipment use rates (e.g., the Construction Equipment Ownership and Operating Expense Schedule published by the U.S. Army Corps of Engineers, industry-sponsored construction equipment cost guides, or commercially published schedules of construction equipment use cost) provide average ownership and operating rates for construction equipment. The allowance for operating costs may include costs for such items as fuel, filters, oil, and grease; servicing, repairs, and maintenance; and tire wear and repair. Costs of labor, mobilization, demobilization, overhead and profit are generally not reflected in schedules, and separate consideration may be necessary.

(iii) When a schedule of predetermined use rates for construction equipment is used to determine direct costs, all costs of equipment that are included in the cost allowances provided by the schedule shall be identified and eliminated from the contractor's other direct and indirect costs charged to the contract. If the contractor's accounting system provides for site or home office overhead allocations, all costs which are included in the equipment allowances may need to be included in any cost input base before computing the contractor's overhead rate. In periods of suspension of work pursuant to a contract clause, the allowance for equipment ownership shall not exceed an amount for standby cost as determined by the schedule or contract provision.

(2) Reasonable costs of renting construction equipment are allowable (but see paragraph (iii) below).

(i) Costs such as maintenance and minor or running repairs incident to operating such rented equipment that are not included in the rental rate, are allowable.

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(ii) Costs incident to major repair and overhaul of rental equipment are unallowable.

(iii) The allowability of charges for construction equipment rented from any division, subsidiary, or organization under common control, will be determined in accordance with 8.36(b)(3).

(c) Costs incurred at the job site incident to performing the work, such as the cost of

superintendence, timekeeping and clerical work, engineering, utility cost, supplies, material handling, restoration and cleanup, etc., are allowable as direct or indirect costs, provided the accounting practice used is in accordance with the contractor's established and consistently followed cost accounting practices for all work.

(d) Rental and any other costs, less any applicable credits incurred in acquiring the temporary use of land, structures, and facilities are allowable. Costs, less any applicable credits, incurred in constructing or fabricating structures and facilities of a temporary nature are allowable.

4 COMPOSITION OF TOTAL COST The total cost of a contract is the sum of the allowable direct and indirect costs allocable to the contract, incurred or to be incurred, less any allocable credits, plus any allocable cost of money (see 8.10). Any generally accepted method of determining or estimating costs that is equitable and is consistently applied may be used to ascertain total costs.

4.1 DETERMINATION OF ALLOWABILITY

The following factors shall be considered in determining whether a cost is allowable:

(a) Reasonableness. (b) Allocability. (c) Generally accepted accounting principles and practices appropriate to the particular

circumstances. (d) Terms of the contract. (e) Any limitation set forth in this Appendix.

4.2 DETERMINING REASONABLENESS

(a) A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person in the conduct of competitive business. Reasonableness of specific costs must be examined with particular care in connection with firms or their separate divisions that may not be subject to effective competitive restraints. No presumption of reasonableness shall be attached to the incurrence of costs by a contractor. If an initial review of the facts results in a challenge of a specific cost by the CO or the CO's representative, the burden of proof shall be upon the contractor to establish that such cost is reasonable.

(b) What is reasonable depends upon a variety of considerations and circumstances, including – (1) Whether it is the type of cost generally recognized as ordinary and necessary for

the conduct of the contractor's business or contract performance; (2) Generally accepted sound business practices, arm's-length bargaining, and Federal and

State laws and regulations.

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(3) The contractor's responsibilities to Bonneville, other customers, the owners of the business, employees, and the public at large; and

(4) Any significant deviations from the contractor's established practices.

4.3 DETERMINATION OF ALLOCABILITY

A cost is allocable if it is assignable or chargeable to one or more cost objectives on the basis of relative benefits received or other equitable relationship. Subject to the foregoing, a cost is allocable to the contract if it –

(a) Is incurred specifically for the contract;

(b) Benefits both the contract and other work, and can be distributed to them in reasonable proportion to the benefits received; or

(c) Is necessary to the overall operation of the business, although a direct relationship to any particular cost objective cannot be shown.

4.4 CREDITS

The applicable portion of any income, rebate, allowance, or other credit relating to any allowable cost and received by or accruing to the contractor shall be credited to Bonneville either as a cost reduction or by cash refund.

5 DIRECT COSTS (a) A direct cost is any cost that can be identified specifically with a specific final cost objective.

No cost shall be allocated as a direct cost to a final cost objective, if the same cost is allocated as an indirect cost and has been included in any indirect final cost objective. Costs identified specifically with the contract are direct costs of the contract and are to be charged directly to the contract. All costs specifically identified with other final cost objectives of the contractor are direct costs of those cost objectives.

(b) For reasons of practicality, any direct cost of minor dollar amount may be treated as an indirect cost if the accounting treatment – (1) Is consistently applied to all final cost objectives; and (2) Produces substantially the same results as treating the cost as a direct cost.

6 INDIRECT COSTS (a) An indirect cost is any cost not directly identified with a specific, single, final cost objective,

but instead is identified with two or more final cost objectives or an intermediate cost objective. It is not subject to treatment as a direct cost. After direct costs have been determined and charged directly to the contract or other work, indirect costs are those remaining to be allocated to the several cost objectives. An indirect cost shall not be allocated to a final cost objective if other costs incurred for the same purpose in like circumstances have been included as a direct cost of that or any other final cost objective.

(b) Indirect costs shall be accumulated by logical cost groupings with due consideration of the reasons for incurring such costs. Each grouping should be determined so as to permit distribution of the grouping on the basis of the benefits accruing to the several cost

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objectives. This necessitates the selection of a distribution base common to all cost objectives to which the grouping is to be allocated. When substantially the same results can be achieved through less precise methods, the number and composition of cost groupings should be governed by practical considerations and should not unduly complicate the allocation.

(c) Once an appropriate base for the distribution of indirect costs has been accepted, it shall not be fragmented by the removal of individual elements. All items properly includable in an indirect cost base should bear a pro rata share of indirect costs irrespective of their acceptance as Government contract costs. For example, when a cost input base is used for the distribution of general and administrative (G&A) costs, all items that would properly be part of the cost input base, whether allowable or unallowable, shall be included in the base and bear their pro rata share of G&A costs.

(d) The contractor's method of allocating indirect costs shall be in accordance with generally accepted accounting principles which are consistently applied. The method may require examination when – (1) Substantial differences occur between the cost patterns of work under the contract and

the contractor's other work; (2) Significant changes occur in the nature of the business, the extent of subcontracting,

fixed-asset improvement programs, inventories, the volume of sales and production, manufacturing processes, the contractor's other products, or other relevant circumstances; or

(3) Indirect cost groupings developed for a contractor's primary location are applied to off-site locations. Separate cost groupings for costs allocable to off-site locations may be necessary to permit equitable distribution of costs on the basis of the benefits accruing to the several cost objectives

7 APPLICATION OF PRINCIPLES AND PROCEDURES (a) Costs shall be allowed to the extent they are reasonable, allocable, and determined to

be allowable under this Appendix. These criteria apply to all of the selected items that follow, even if particular guidance is provided for certain items for emphasis or clarity.

(b) Costs incurred as reimbursements or payments to a subcontractor under a cost-reimbursement or fixed-price incentive type subcontract are allowable to the extent consistent with this Appendix. Costs incurred as payments under firm fixed-price subcontracts or fixed-price subcontracts with economic price adjustment provisions or modifications thereto, when cost analysis was performed, shall be allowable only to the extent that the price was negotiated in accordance with this Appendix.

(c) Section 8 does not cover every element of cost. Failure to include any item of cost

does not imply that it is either allowable or unallowable. The determination of allowability shall be based on the principles and standards in this subsection and the treatment of similar or related selected items. When more than one subsection in Section 8 is relevant to a contractor cost, the cost shall be apportioned among the applicable subsections, and the determination of allowability of each portion shall be based on the guidance contained in the applicable subsection. When a cost to which more than one subsection in Section 8 is relevant cannot be apportioned, the determination of allowability shall be

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based on the guidance contained in the subsection that most specifically deals with, or best captures the essential nature of, the cost at issue.

(d) Deviations from the cost principles in this subsection shall be processed in accordance with the procedures in BPI subpart 1.7.

8 SELECTED COSTS

8.1 PUBLIC RELATIONS AND ADVERTISING COSTS

(a) “Public relations” means all functions and activities dedicated to – (1) Maintaining, protecting, and enhancing the image of a concern or its products; or (2) Maintaining or promoting reciprocal understanding and favorable relations with the public

at large, or any segment of the public. The term “public relations” includes activities associated with areas such as advertising, customer relations, etc.

(b) “Advertising” means the use of media to promote the sale of products or services and to

accomplish the activities referred to in paragraph (d) of this subsection, regardless of the medium employed, when the advertiser has control over the form and content of what will appear, the media in which it will appear, and when it will appear. Advertising media include but are not limited to conventions, exhibits, free goods, samples, magazines, newspapers, trade papers, direct mail, dealer cards, window displays, outdoor advertising, radio and television.

(c) Public relations and advertising costs include the costs of media time and space, and purchased services performed by outside organizations, as well as the applicable portion of salaries, travel, and fringe benefits of employees engaged in the functions and activities identified in paragraphs (a) and (b) of this subsection.

(d) The only advertising costs that are allowable are those specifically required by contract, or

that arise from requirements of Bonneville contracts and that are exclusively for – (1) Recruiting personnel required for performing contractual obligations, when considered in

conjunction with all other recruitment costs (but see 8.34); (2) Acquiring scarce items for contract performance; or (3) Disposing of scrap or surplus materials acquired for contract performance.

(e) Allowable public relations costs include the following: (1) Costs specifically required by contract. (2) Costs of –

(i) Responding to inquiries on company policies and activities; (ii) Communicating with the public, press, stockholders, creditors, and customers; and (iii) Conducting general liaison with news media and Government public relations

officers, to the extent that such activities are limited to communication and liaison necessary to keep the public informed on matters of public concern, such as notice of contract awards, plant closings or openings, employee layoffs or rehires, financial information, etc.

(3) Costs of participation in community service activities (e.g., blood bank drives, charity drives, savings bond drives, disaster assistance, etc.).

(4) Costs of plant tours and open houses (but see subparagraph (f)(5) of this subsection).

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(f) Unallowable public relations and advertising costs include the following: (1) All advertising costs other than those specified in paragraph (d) of this subsection. (2) Costs of air shows and other special events or trade shows which do not include a

significant effort to promote the export of products normally sold to the U.S. Government. (3) Costs of sponsoring meetings, symposia, seminars, and other special events when the

principal purpose of the event is other than dissemination of technical information or stimulation of production.

(4) Costs of ceremonies, such as corporate celebrations and new product announcements. (5) Costs of promotional material, motion pictures, videotapes, brochures, handouts,

magazines, and other media that are designed to call favorable attention to the contractor and its activities.

(6) Costs of souvenirs, models, imprinted clothing, buttons, and other mementos provided to customers or the public.

(7) Costs of memberships in civic and community organizations.

8.2 AUTOMATIC DATA PROCESSING EQUIPMENT LEASING COSTS

(a) This subsection applies to all contractor-leased automatic data processing equipment (ADPE) (except as components of an end item to be delivered to Bonneville acquired under operating leases, as defined in Statement of Financial Accounting Standard No. 13 (FAS-13), Accounting for Leases, issued by the Financial Accounting Standards Board. Compliance with 8.11(M) requires that ADPE acquired by means of capital leases, as defined in FAS-13, shall be treated as purchased assets. Allowability of costs related to contractor-owned ADPE is governed by other provisions of this subsection.

(b) (1) If the contractor leases ADPE but cannot demonstrate, on the basis of facts existing at

the time of the decision to lease or continue leasing (and documented in accordance with paragraph (d) below) that leasing will result in less cost to Bonneville over the anticipated useful life (see paragraph (c) below), then rental costs are allowable only up to the amount that would be allowed had the contractor purchased the ADPE.

(2) The costs of leasing ADPE are allowable to the extent that the contractor can annually demonstrate in accordance with paragraph (d) below (whether or not the term of lease is renewed or otherwise extended) that these costs meet the following criteria:

(i) The costs are reasonable and necessary for the conduct of the contractor’s business in light of factors such as the contractor’s requirements for ADPE, costs of comparable facilities, the various types of leases available, and the provisions of the rental agreement.

(ii) The costs do not give rise to a material equity in the facilities but represent charges only for the current use of the equipment, including incidental service costs such as maintenance, insurance, and applicable taxes.

(iii) The CO’s approval was obtained for the leasing arrangement (see subparagraph (d)(3) below) when the total cost of leasing the ADPE: (A) Is to be allocated to one or more government contract which require the

negotiation or determination costs; or (B) In a single plant, division, or cost center exceeds $500,000 a year and 50

percent or more of the total leasing costs is to be allocated to one or more government contracts which require the negotiation or determination of costs.

(3) Rental costs under a sale and leaseback arrangement are allowable only up to the amount that would have been allowed had the contractor retained title to the ADPE.

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(4) Allowable rental costs of ADPE leased from any division, subsidiary, or organization under a common control are limited to the cost of ownership (excluding interest or other costs unallowable under this Section 8, and including the cost of money (see 8.10)). When there is an established practice of leasing the same or similar equipment to unaffiliated lessees, rental costs shall be allowed under subparagraphs (b)(1) and (2) above, except that the purchase price and costs of ownership shall be determined under 8.26(e).

(c) (1) An estimate of the anticipated useful life of the ADPE may present the application life

(utility in a given function), technological life (utility before becoming obsolete in whole or in part), or physical life (utility before wearing out). Each case must be evaluated individually. In estimating anticipated useful life, the contractor may use the application life if it can be demonstrated that the ADPE has utility only in a given function and the duration of the function can be determined. Technological life may be used if the contractor can demonstrate that existing ADPE must be replaced because of –

(i) Specific program objectives or contract requirements that cannot be accomplished with the existing ADPE;

(ii) Cost reductions that will produce identifiable savings in production or overhead costs;

(iii) Increase in workload volume that cannot be accomplished efficiently by modifying or augmenting existing ADPE; or

(iv) Consistent pattern of capacity operation (2 ½ - 3 shifts) on existing ADPE. (2) Technology advances will not justify replacing existing ADPE before the end of its

physical life if it will be able to satisfy future requirements or demands. (3) In estimating the least cost to Bonneville for useful life, the cumulative costs that would

be allowed if the contractor owned the ADPE should compared with cumulative costs that would be allowed under any of the various types of leasing arrangements available.

(d) (1) Except as provided in subparagraph (3) below, the contractor’s justification, under

paragraph (b) above, of the leasing decisions shall consist of the following supporting data, prepared before purchase:

(i) Analysis of use of existing ADPE. (ii) Application of the criteria in paragraph (b) above. (iii) Specific objectives or requirements, generally in the form of a data system study

and specification. (iv) Solicitation of proposal, based on the data system specification, from qualified

sources. (v) Proposals received in response to the solicitation and reasons for selection of the

equipment chosen and for the decision to lease. (2) Except as provided in subparagraph (3) below, the contractor’s annual justification,

under subparagraph (b)(2) above, of the decision to retain or change existing ADPE capability and the need to continue leasing shall consist of current data as specified in (d)(1)(i) through (iii) above.

(3) If the contractor’s prospective ADPE lease cost meets the threshold in 8.2(b)(2)(iii) above, the contractor shall furnish data in support of the initial decision to lease (see subparagraph (b)(1) above). If the total cost of leasing ADPE in a single plant, division, or cost center exceeds $500,000 per year and 50 percent or more of the total leasing cost is allocated to Bonneville contracts which require the negotiating or determining costs, the contractor shall furnish data supporting the annual justification for retaining or changing existing ADPE capability and the need to continue leasing shall also be furnished (see subparagraph (b)(2) above).

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8.3 BAD DEBTS

Bade debts, including actual or estimated losses arising from uncollectable accounts receivable due from customers and other claims, related collection costs, and related legal costs are unallowable.

8.4 BONDING COSTS

(a) Bonding costs arise when Bonneville requires assurance against financial loss to itself or others by reason of the act or default of the contractor. They arise also in instances where the contractor requires similar assurance. Included are such bonds as bid, performance, payment, advance payment, infringement, and fidelity bonds.

(b) Costs of bonding required pursuant to the terms of the contract are allowable.

(c) Costs of bonding required by the contractor in the general conduct of its business are allowable to the extent that such bonding is in accordance with sound business practice and the rates and premiums are reasonable under the circumstances.

8.5 CIVIL DEFENSE COSTS

(a) Civil defense costs are those incurred in planning for, and protecting life and property against, the possible effects of enemy attack. Costs of civil defense measures (including costs in excess of normal plant protection costs, first-aid training and supplies, fire-fighting training and equipment, posting of additional exit notices and directions, and other approved civil defense measures) undertaken on the contractor's premises pursuant to suggestions or requirements of civil defense authorities are allowable when allocated to all work of the contractor.

(b) Costs of capital assets acquired for civil defense purposes are allowable through depreciation (see 8.11).

(c) Contributions to local civil defense funds and projects are unallowable.

8.6 COMPENSATION FOR PERSOANL SERVICES

(a) General. Compensation for personal services includes all remuneration paid currently or accrued, in whatever form and whether paid immediately or deferred, in whatever form and whether paid immediately or deferred, for services rendered by employees to the contractor during the period of contract performance (except as otherwise provided for severance pay costs in paragraph (g) below and for pension costs in paragraph (j) below). It includes, but is not limited to, salaries; wages; directors' and executive committee members' fees; bonuses (including stock bonuses); incentive awards; employee stock options, stock appreciation rights, employee stock options, and stock appreciation rights; employee stock ownership plans; employee insurance; fringe benefits; contributions to pension, other post-retirement benefits, annuity and employee incentive compensation plans; and allowances for off-site pay, incentive pay, location allowances, hardship pay, severance pay, and cost-of-living differential. Compensation for personal services is allowable subject to the following general criteria and additional requirements contained in other Sections of this cost principle:

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(1) Compensation for personal services must be for work performed by the employee in the current year and must not represent a retroactive adjustment of prior years’ salaries or wages (but see 8.6(g), (h), (j), (k), (m), and (o) below).

(2) The compensation in total must be reasonable for the work performed; however, specific restrictions on individual compensation elements must be observed where they are prescribed.

(3) The compensation must be based upon and conform to the terms and conditions of the contractor's established compensation plan or practice followed so consistently as to imply, in effect, an agreement to make the payment.

(4) No presumption of allowability will exist where the contractor introduces major revisions of existing compensation plans or new plans and the contractor – (i) Has not notified the CO of the changes, either before their implementation or

within a reasonable period after their implementation, and (ii) Has not provided Bonneville, either before implementation or within a reasonable

period after it, an opportunity to review the allowability of the changes. (5) Costs that are unallowable under other paragraphs of this Appendix shall not be

allowable under this subsection 8.6 solely on the basis that they constitute compensation for personal services. (See 8.34(c))

(b) Reasonableness.

(1) The compensation for personal services paid or accrued to each employee must be reasonable for the work performed. Compensation will be considered reasonable if each of the allowable elements making up the employee's compensation package is reasonable. In determining the reasonableness of individual elements for particular employees or classes of employees, consideration should be given to all potentially relevant facts. Facts which may be relevant include general conformity with the compensation practices of other firms of the same size, the compensation practices of other firms in the same industry, the compensation practices of other firms in the same geographic area, the compensation practices of firms engaged in predominantly non-Government work, and the cost of comparable services obtainable from outside sources. While all of the above factors, as well as any other relevant ones, should be considered, their relative significance will vary according to circumstances. For example, in the case of secretarial salaries, conformity with the compensation paid by other firms in the same geographic area would likely be a more significant criterion than conformity with the compensation paid by other firms in the same industry wherever located. The tests for reasonableness of labor-management agreements are set forth in paragraph (c) of this subsection. In addition to the provisions of section 4.2 of this appendix, in testing the reasonableness of individual elements for particular employees or job classes of employees, consideration should be given to factors determined to be relevant by the CO. In administering this principle, it is recognized that not every compensation case need be subjected in detail to the above or other tests. The tests need be applied only when a general review reveals amounts or types of compensation that appear unreasonable or unjustified. Based on an initial review of the facts, COs or their representatives may challenge the reasonableness of any individual element or the sum of the individual elements of compensation paid or accrued to particular employees or classes of employees. In such cases, there is no presumption of reasonableness and, upon challenge; the contractor must demonstrate the reasonableness of the compensation item in question. In doing so the contractor may introduce, and the

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CO will consider, not only any circumstances surrounding the compensation item challenged, but also the magnitude of other compensation elements which may be lower than would be considered reasonable in themselves. For example, a contractor, if challenged on the amount of base salaries for management, could counter by showing lower-than- normal end-of-year management bonuses. However, the contractor's right to introduce offsetting compensation elements into consideration is subject to the following limitations: (i) Offsets will be considered only between the allowable elements of an

employee's (or a class of employees') compensation package. For example, excessive management salaries cannot be offset against lower-than-norm al secretarial salaries.

(ii) Offsets will be considered only between the allowable portion of the following compensation elements of employees or classes of employees: (A) Wages and salaries. (B) Incentive bonuses. (C) Deferred compensation. (D) Pension and savings plan benefits. (E) Health insurance benefits. (F) Life insurance benefits. (G) Compensated personal absence benefits. However, any of the above elements or portions thereof, whose amount is not measurable, shall not be introduced or considered as an offset item.

(iii) In considering offsets, the magnitude of the compensation elements in question must be taken into account. An executive bonus that is excessive by $100,000 is not fully offset by a base salary that is low by only $25,000. In determining the magnitude of compensation elements, the timing of receipt by the employee must be considered. For example, a bonus of $100,000 in the current period will be considered as of greater value than a deferred compensation arrangement to make the same payment in some future period.

(2) Compensation costs under certain conditions give rise to the need for special consideration. Among such conditions are the following: (i) Compensation to owners of closely held corporations, partners, sole proprietors, or

members of their immediate families, or persons who are contractually committed to acquire a substantial financial interest in the contractor's enterprise. Determination should be made that salaries are reasonable for the personal services rendered rather than being a distribution of profits. Compensation in lieu of salary for services rendered by partners and sole proprietors will be allowed to the extent that it is reasonable and does not constitute a distribution of profits. For closely held corporations, compensation costs covered by this subdivision shall not be recognized in amounts exceeding those costs that are deductible as compensation under the Internal Revenue Code and regulations under it.

(ii) Any change in a contractor's compensation policy that results in a substantial increase in the contractor's level of compensation, particularly when it was concurrent with an increase in the ratio of Government contracts to other business, or any change in the treatment of allowability of specific types of compensation due to changes in Government policy. COs or their representatives should normally challenge increased costs where major revisions of existing

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compensation plans or new plans are introduced by the contractor, and the contractor – (A) Has not notified the CO of the changes either before their implementation or

within a reasonable period after their implementation; and (B) Has not provided Bonneville, either before implementation or within a

reasonable period after it, an opportunity to review the reasonableness of the changes.

(iii) The contractor's business is such that its compensation levels are not subject to the restraints that normally occur in the conduct of competitive business.

(iv) The contractor incurs costs for compensation in excess of the amounts which are deductible under the Internal Revenue Code and regulations issued under it.

(c) Labor-management agreements. If cost of compensation established under “arm’s length”

negotiated labor-management agreements is otherwise allowable, the costs are reasonable if, as applied to work in performing Government contracts, it is not determined to be unwarranted by the character and circumstances of the work or discriminatory against the Government. The application of the provisions of a labor-management agreement designed to apply to a given set of circumstances and conditions of employment (e.g., work involving extremely hazardous activities or work not requiring recurrent use of overtime) is unwarranted when applied to a Government contract involving significantly different circumstances and conditions of employment (e.g., work involving less-hazardous activities or work continually requiring use of overtime). It is discriminatory against the Government if it results in employee compensation (in whatever form or name) in excess of that being paid for similar non-Government work under comparable circumstances. Disallowance of costs will not be made under this paragraph (c) unless – (1) The contractor has been permitted an opportunity to justify the costs; and (2) Due consideration has been given to whether unusual conditions pertain to

Government contract work, imposing burdens, hardships, or hazards on the contractor’s employees, for which compensation that might otherwise appear unreasonable is required to attract and hold necessary personnel.

(d) Form of payment.

(1) Compensation for personal services includes compensation paid or to be paid in the future to employees in the form of cash, corporate securities, such as stocks, bonds, and other financial instruments (see paragraph (d)(2) of this subsection regarding valuation), or other assets, products, or services.

(2) When compensation is paid with securities of the contractor or of an affiliate, the following additional restrictions apply: (i) Valuation placed on the securities shall be the fair market value on the

measurement date (i.e., the first date the number of shares awarded is known) determined upon the most objective basis available.

(ii) Accruals for the cost of securities before issuing the securities to the employees shall be subject to adjustment according to the possibilities that the employees will not receive the securities and that their interest in the accruals will be forfeited.

(e) Domestic and foreign differential pay.

(1) When personal services are performed in a foreign country, compensation may also include a differential that may properly consider all expenses associated with foreign

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employment such as housing; cost of living adjustments; transportation; bonuses; additional Federal, State, local or foreign income taxes resulting from foreign assignment; and other related expenses.

(2) Differential allowances for additional Federal, state, or local income taxes resulting from domestic assignments are unallowable.

(f) Bonuses and incentive compensation.

(1) Incentive compensation for management employees, cash bonuses, suggestion awards, safety awards, and incentive compensation based on production, cost reduction, or efficient performance are allowable provided the awards are paid or accrued under an agreement entered into in good faith between the contractor and the employees before the services are rendered or pursuant to an established plan or policy followed by the contractor so consistently as to imply, in effect, an agreement to make such payment and the basis for the award is supported.

(2) When the bonus and incentive compensation payments are deferred, the costs are subject to the requirements of subparagraph (f)(1) above and of paragraph (k) below.

(g) Severance pay.

(1) Severance pay, also commonly referred to as dismissal wages, is a payment in addition to regular salaries and wages by contractors to workers whose employment is being involuntarily terminated. Payments for early retirement incentive plans are covered in subparagraph (j)(7) below.

(2) Severance pay, to be allowable, must meet the general allowability criteria in subdivision (g)(2)(i) below, and, depending upon whether the severance is normal or abnormal, criteria in subdivision (g)(2)(ii) for normal severance pay or subdivision (g)(2)(iii) for abnormal severance pay also apply. (i) Severance pay is allowable only to the extent that, in each case, it is required

by (A) law, (B) employer-employee agreement, (C) established policy that constitutes, in effect, an implied agreement on the contractor's part, or (D) circumstances of the particular employment. Payments made in the event of employment with a replacement contractor where continuity of employment with credit for prior length of service is preserved under substantially equal conditions of employment, or continued employment by the contractor at another facility, subsidiary, affiliate, or parent company of the contractor are not severance pay and are unallowable.

(ii) Actual normal turnover severance payments shall be allocated to all work performed in the contractor's plant, or where the contractor provides for accrual of pay for normal severances, that method will be acceptable if the amount of the accrual is reasonable in light of payments actually made for normal severances over a representative past period and if amounts accrued are allocated to all work performed in the contractor's plant.

(iii) Abnormal or mass severance pay is of such a conjectural nature that measurement of costs by means of an accrual will not achieve equity to both parties. Thus, accruals for this purpose are not allowable. However, the Government recognizes its obligation to participate, to the extent of its fair share, in any specific payment. Thus, allowability will be considered on a case-by-case basis.

(h) Back pay.

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(1) Back pay resulting from violations of Federal labor laws or the Civil Rights Act of 1964. Back pay may result from a negotiated settlement, order, or court decree that resolves a violation of Federal labor laws or the Civil Rights Act of 1964. Such back pay falls into two categories: one requiring the contractor to pay employees additional compensation for work performed for which they were underpaid, and the other resulting from other violations, such as when the employee was improperly discharged, discriminated against, or other circumstances for which the back pay was not additional compensation for work performed. Back pay resulting from underpaid work is compensation for the work performed and is allowable. All other back pay resulting from violation of Federal labor laws or the Civil Rights Act of 1964 is unallowable.

(2) Other back pay. Back pay may also result from payments to employees (union and non-union) for the difference in their past and current wage rates for working without a contract or labor agreement during labor management negotiations. Such back pay is allowable. Back pay to nonunion employees based upon results of union agreement negotiations is allowable only if (i) a formal agreement or understanding exists between management and the employees concerning these payments, or (ii) an established policy or practice exists and is followed by the contractor so consistently as to imply, in effect, an agreement to make such payment. (i) Compensation based on changes in the prices of corporate securities or

corporate security ownership, such as stock options, stock appreciation rights, phantom stock plans, and junior stock conversions. (A) Any compensation which is calculated, or valued, based on changes in the

price of corporate securities is unallowable. (B) Any compensation represented by dividend payments or which is calculated

based on dividend payments is unallowable. (C) If a contractor pays an employee in lieu of the employee receiving or

exercising a right, option, or benefit which would have been unallowable under this paragraph (i), such payments are also unallowable.

(i) Pension costs.

(1) A pension plan is a deferred compensation plan that is established and maintained by one or more employers to provide systematically for paying benefits to plan participants after their retirement, provided that the benefits are paid for life or are payable for life at the option of the employee. Additional benefits such as permanent and total disability and death payments and survivorship payments to beneficiaries of deceased employees may be treated as pension costs, provided the benefits are an integral part of the pension plan and meet all the criteria pertaining to pension costs.

(2) Pension plans are normally segregated into two types of plans: defined benefit or defined contribution pension plans. The cost of all defined benefit pension plans shall be measured, allocated, and accounted for in compliance with the provisions of 48 CFR 9904.412, Composition and Measurement of Pension Costs, and 48 CFR 9904.413, Adjustment and Allocation of Pension Cost. The costs of all defined contribution pension plans shall be measured, allocated, and accounted for in accordance with the provisions of 48 CFR 9904.412. Pension costs are allowable subject to the referenced standards and the cost limitations and exclusions set forth below in subparagraphs (i)(2)(i) and (i)(3) through (8) of this subsection.

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(i) Except for unfunded pension plans to be allowable in the current year, pension costs must be funded by the time set for filing the Federal income tax return or any extension thereof. Pension costs assigned to the current year, but not funded by the tax return time, shall not be allowable in any subsequent year.

(ii) Pension payments must be reasonable in amount and be paid pursuant to (A) an agreement entered into in good faith between the contractor and employees before the work or services are performed, and (B) the terms and conditions of the established plan. The cost of changes in pension plans which are discriminatory to the Government or are not intended to be applied consistently for all employees under similar circumstances in the future are not allowable.

(iii) Except as provided for early retirement benefits in subparagraph (i)(7) below, one-time-only pension supplements not available to all participants of the basic plan are not allowable as pension costs unless the supplemental benefits represent a separate pension plan and the benefits are payable for life at the option of the employee.

(iv) Increases in payments to previously retired plan participants covering cost-of-living adjustments are allowable if paid in accordance with a policy or practice consistently followed.

(3) Defined benefit pension plans. This subparagraph covers pension plans in which the benefits to be paid or the basis for determining such benefits are established in advance and the contributions are intended to provide the stated benefits. The cost limitations and exclusions pertaining to defined benefit plans are as follows: (i)

(A) Except for unfunded pension plans, normal costs of pension plans not funded in the year incurred, and all other components of pension costs assignable to the current accounting period but not funded during it, shall not be allowable in subsequent years (except that a payment made to fund by the time set for filing the Federal income tax return or any extension thereof is considered to have been made during such taxable year). However, any part of a pension cost that is computed for a cost accounting period that is deferred pursuant to a waiver granted under the provisions of the Employee's Retirement Income Security Act of 1974 (ERISA) will be allowable in those future accounting periods in which the funding does occur. The allowability of these deferred contributions will be limited to the amounts that would have been allowed had the funding occurred in the year the costs would have been assigned except for the waiver.

(B) Reserved. (ii) Any amount paid or funded before the time it becomes assignable and allowable

shall be applied to future years, in order of time, as if actually paid and deductible in those years. The interest earned on such premature funding, based on the valuation rate of return, may be excluded from future years' computations of pension costs.

(iii) Increased pension costs caused by delay in funding beyond 30 days after each quarter of the year to which they are assignable are unallowable. If a composite rate is used for allocating pension costs between the segments of a company and if, because of differences in the timing of the funding by the segments, an inequity exists, allowable pension costs for each segment will be limited to that particular segment's calculation of pension costs. Determination of unallowable

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costs shall be made in accordance with the actuarial method used in calculating pension costs.

(iv) Allowability of the cost of indemnifying the Pension Benefit Guaranty Corporation (PBGC) under ERISA Section 4062 or 4064 arising from terminating an employee deferred compensation plan will be considered on a case-by-case basis; provided that if insurance was required by the PBGC under ERISA Section 4023, it was so obtained and the indemnification payment is not recoverable under the insurance. Consideration under the foregoing circumstances will be primarily for the purpose of appraising the extent to which the indemnification payment is allocable to Government work. If a beneficial or other equitable relationship exists, the Government will participate, despite the requirements of 8.19(a)(3) and (b), in the indemnification payment to the extent of its fair share.

(v) Allowability of the cost of indemnifying the Pension Benefit Guaranty Corporation (PBGC) under ERISA Section 4062 or 4064 arising from terminating an employee deferred compensation plan will be considered on a case-by-case basis; provided that if insurance was required by the PBGC under ERISA Section 4023, it was so obtained and the indemnification payment is not recoverable under the insurance. Consideration under the foregoing circumstances will be primarily for the purpose of appraising the extent to which the indemnification payment is allocable to Government work. If a beneficial or other equitable relationship exists, the Government will participate, despite the requirements of 8.19(a)(3) and (b), in an indemnification payment to the extent of its fair share. Increased pension costs resulting from the withdrawal of assets from a pension fund and transfer to another employee benefit plan fund are unallowable except to the extent authorized by an advance agreement. The advance agreement shall: (A) State the amount of the Government's equitable share in the gross amount

withdrawn, and (B) Provide that the Government receive a credit equal to the amount of the

Government's equitable share of the gross withdrawal. If a transfer is made without such an agreement, paragraph (i)(4) of this subsection will apply to the transfer as a constructive withdrawal and receipt of funds by the contractor.

(4) Termination of defined benefit pension plans. When excess or surplus assets revert to the contractor as a result of termination of a defined pension plan, or such assets are constructively received by it for any reason, the contractor shall make a refund or give a credit to the Government for its equitable share of the gross amount withdrawn. The Government's equitable share shall reflect the Government's participation in pension costs through those contracts for which certified cost or pricing data were submitted or which are subject to this Appendix.

(5) Defined contribution pension plans. This subparagraph covers those pension plans in which the contributions to be made are established in advance and the level of benefits is determined by the contributions made. It also covers profit sharing, savings plans, and other such plans provided the plans fall within the definition of a pension plan in subparagraph (i)(1) above. (i) The pension cost assignable to a cost accounting period is the net contribution

required to be made for that period after taking into account dividends and

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other credits, where applicable. However, any portion of pension cost computed for a cost accounting period that is deferred pursuant to a waiver granted under the provisions of ERISA will be allowable in those future accounting periods when the funding does occur. The allowability of these deferred contributions will be limited to the amounts that would have been allowed had the funding been made in the year the costs would have been assigned except for the waiver.

(ii) Any amount paid or funded to the trust before the time it becomes assignable and allowable shall be applied to future years, in order of time, as if actually paid and deductible in such years.

(iii) The provisions of subdivision (i)(3)(iv) above concerning payments to PBGC apply to defined contribution plans.

(6) Reserved. (7) Early retirement incentive plans. An early retirement incentive plan is a plan under which

employees receive a bonus or incentive, over and above the requirement of the basic pension plan, to retire early. These plans normally are not applicable to all participants of the basic plan and do not represent life income settlements, and as such would not qualify as pension costs. However, for contract costing purposes, early retirement incentive payments are allowable subject to the pension cost criteria contained in subdivisions (i)(3)(i) through (iv), provided – (i) The costs are accounted for and allocated in accordance with the contractor's

system of accounting for pension costs; (ii) The payments are made in accordance with the terms and conditions of the

contractor's plan; (iii) The plan is applied only to active employees. The cost of extending the plan to

employees who retired or were terminated before the adoption of the plan is unallowable; and

(iv) The total of the incentive payments to any employee may not exceed the amount of the employee's annual salary for the previous fiscal year before the employee's retirement.

(8) Employee stock ownership plans (ESOP) (i) An ESOP is an individual stock bonus plan designed specifically to invest in the

stock of the employer corporation. The contractor's contributions to an Employee Stock Ownership Trust (ESOT) may be in the form of cash, stock, or property. Costs of ESOPs are allowable, subject to the following conditions: (A) Contributions by the contractor in any one year may not exceed 15 percent

(25 percent when a money purchase plan is included) of salaries and wages of employees participating in the plan in any particular year.

(B) The contribution rate (ratio of contribution to salaries and wages of participating employees) may not exceed the last approved contribution rate except when approved by the CO based upon justification provided by the contractor. When no contribution was made in the previous year for an existing ESOP, or when a new ESOP is first established, and the contractor proposes to make a contribution in the current year, the contribution rate shall be subject to the CO's approval.

(C) When a plan or agreement exists wherein the liability for the contribution can be compelled for a specific year, the expense associated with that liability is assignable only to that period. Any portion of the contribution not funded by

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the time set for filing of the Federal income tax return for that year or any extension thereof shall not be allowable in subsequent years.

(D) When a plan or agreement exists wherein the liability for the contribution cannot be compelled, the amount contributed for any year is assignable to that year, provided the amount is funded by the time set for filing of the Federal income tax return for that year.

(E) When the contribution is in the form of stock, the value of the stock contribution shall be limited to the fair market value of the stock on the date that title is effectively transferred to the trust. Cash contributions shall be allowable only when the contractor furnishes evidence satisfactory to the CO demonstrating that stock purchases by the ESOT are or will be at a fair market price; (e.g., makes arrangements with the trust permitting the CO to examine purchases of stock by the trust to determine that prices paid are at fair market value.) When excessive prices are paid, the amount of the excess will be credited to the same indirect cost pools that were charged for the ESOP contributions in the year in which the stock purchase occurs. However, when the trust purchases the stock with borrowed funds which will be repaid over a period of years by cash contributions from the contractor to the trust, the excess price over fair market value shall be credited to the indirect cost pools pro rata over the period of years during which the contractor contributes the cash used by the trust to repay the loan. When the fair market value of unissued stock or stock of a closely held corporation is not readily determinable, the valuation will be made on a case-by-case basis, taking into consideration the guidelines for valuation used by the IRS.

(ii) Amounts contributed to an ESOP arising from either (A) an additional investment tax credit (see 1975 Tax Reduction Act--TRASOP's); or (B) a payroll-based tax credit (see Economic Recovery Tax Act of 1981) are unallowable.

(iii) The requirements of subdivision (i)(3)(ii) above are applicable to Employee Stock Ownership Plans.

(j) Deferred compensation.

(1) Deferred compensation is an award given by an employer to compensate an employee in a future cost accounting period or periods for services rendered in one or more cost accounting periods before the date of receipt of compensation by the employee. Deferred compensation does not include the amount of year-end accruals for salaries, wages, or bonuses that are paid within a reasonable period of time after the end of a cost accounting period. Subject to 8.6(a), deferred awards are allowable when they are based on current or future services. Awards made in periods subsequent to the period when the work being remunerated was performed are not allowable.

(2) The costs of deferred awards shall be measured, allocated, and accounted for in compliance with the provisions of 48 CFR 9904.415, Accounting for the Cost of Deferred Compensation.

(3) Deferred compensation payments to employees under awards made before the effective date of 48 CFR 9904.415 are allowable to the extent they would have been allowable under prior regulations.

(k) Compensation incidental to business acquisitions. The following costs are unallowable.

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(1) Payments to employees under agreements in which they receive special compensation, in excess of the contractor's normal severance pay practice, if their employment terminates following a change in the management control over, or ownership of, the contractor or a substantial portion of its assets.

(2) Payments to employees under plans introduced in connection with a change (whether actual or prospective) in the management control over, or ownership of, the contractor or a substantial portion of its assets in which those employees receive special compensation, which is contingent upon the employee remaining with the contractor for a specified period of time.

(l) Fringe benefits.

(1) Fringe benefits are allowances and services provided by the contractor to its employees as compensation in addition to regular wages and salaries. Fringe benefits include, but are not limited to, the cost of vacations, sick leave, holidays, military leave, employee insurance, and supplemental unemployment benefit plans. Except as provided elsewhere in this Appendix, the costs of fringe benefits are allowable to the extent that they are reasonable and are required by law, employer- employee agreement, or an established policy of the contractor.

(2) That portion of the cost of company-furnished automobiles that relates to personal use by employees (including transportation to and from work) is unallowable regardless of whether the cost is reported as taxable income to the employees (see 8.46(f)).

(m) Employee rebate and purchase discount plans. Rebates and purchase discounts, in

whatever form, granted to employees on products or services produced by the contractor or affiliates are unallowable.

(n) Post-retirement benefits other than pensions (PRB). (1) PRB covers all benefits, other than cash benefits and life insurance benefits

paid by pension plans, provided to employees, their beneficiaries, and covered dependents during the period following the employees' retirement. Benefits encompassed include, but are not limited to, post-retirement health care, life insurance provided outside a pension plan, and other welfare benefits such as tuition assistance, day care, legal services, and housing subsidies provided after retirement.

(2) To be allowable, PRB costs must be reasonable and incurred pursuant to law, employer-employee agreement, or an established policy of the contractor. In addition, to be allowable, PRB costs must be calculated in accordance with paragraphs (n)(2)(i), (ii), or (iii) of this subparagraph. (i) Cash basis. Cost recognized as benefits when they are actually provided, must

be paid to an insurer, provider, or other recipient for current year benefits or premiums.

(ii) Terminal funding. If a contractor elects a terminal-funded plan, it does not accrue PRB costs during the working lives of employees. Instead, it accrues and pays the entire PRB liability to an insurer or trustee in a lump sum upon the termination of employees (or upon conversion to such a terminal-funded plan) to establish and maintain a fund or reserve for the sole purpose of providing PRB to retirees. The lump sum is allowable if amortized over a period of 15 years.

(iii) Accrual basis. Accrual costing other than terminal funding must be measured and assigned according to Generally Accepted Accounting Principles and be paid to an insurer or trustee to establish and maintain a fund or reserve for

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the sole purpose of providing PRB to retirees. The accrual must also be calculated in accordance with generally accepted actuarial principles and practices as promulgated by the Actuarial Standards Board.

(3) To be allowable, costs must be funded by the time set for filing the Federal income tax return or any extension thereof. PRB costs assigned to the current year, but not funded or otherwise liquidated by the tax return time, shall not be allowable in any subsequent year.

(4) Increased PRB costs caused by delay in funding beyond 30 days after each quarter of the year to which they are assignable are unallowable.

(5) Costs of post-retirement benefits in subdivision (o)(2)(iii) of this subsection attributable to past service ("transaction obligation") as defined in Financial Accounting Standards Board Statement 106, paragraph 110, are allowable, subject to the following limitation: The allowable amount of such costs assignable to a contractor fiscal year cannot exceed the amount of such costs which would be assigned to that contractor fiscal year under the delayed recognition methodology described in paragraphs 112 and 113 of Statement 106.

(6) The Government shall receive an equitable share of any amount of previously-funded PRB costs which revert or inure to the contractor. Such equitable share shall reflect the Government's previous participation in PRB costs through those contracts for which certified cost or pricing data were required or which were subject to this Appendix.

8.7 CONTINGENCIES

(a) “Contingency” means a possible future event or condition arising from presently known or unknown causes, the outcome of which is indeterminable at the present time.

(b) Costs for contingencies are generally unallowable for historical costing purposes because such costing deals with costs incurred and recorded on the contractor’s books. A contingency factor may be recognized when it is applicable to a past period (such as in a contract termination action) to give recognition to minor unsettled factors in the interest of expediting settlement.

(c) In connection with estimates of future costs, contingencies fall into two categories:

(1) Those that may arise from presently known and existing conditions, the effects of which are foreseeable within reasonable limits of accuracy. Contingencies of this category are to be included in the estimates of future cots.

(2) Those that may arise from presently known or unknown conditions, the effect of which cannot be measured precisely enough to provide equitable results to the contractor and to the Government. Contingencies of this category are to be excluded from cost estimates under the several items of cost, but should be disclosed separately (including the basis upon which the contingency is computed) to facilitate the negotiation of appropriate contractual coverage.

8.8 CONTRIBUTIONS OR DONATIONS

Contributions or donations, including cash, property and services, regardless of recipient, are unallowable, except as provided in 8.1(e)(3).

8.9 [RESERVED]

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8.10 COST OF MONEY

(a) Policy. Facilities capital cost of money and cost of money as an element of capital assets under construction are not allowable costs under Bonneville contracts or intergovernmental contracts.

(b) Background. Facilities Capital Cost of Money is a concept which was originally developed by the Cost Accounting Standards Board as CAS 414 and was applied by law to defense contractors. Allowing facilities capital cost of money for this purpose was intended to reward a contractor's investment in plant and equipment used to increase the productivity of the firm, to encourage the use of modern manufacturing technology, to broaden the nation's mobilization base, and to make the performance of defense contracts more efficient. The cost of capital committed to facilities is an imputed cost determined by applying a cost of money rate to facilities capital. Allowing the recovery of these costs was intended to create an incentive for contractors to invest in cost-cutting machinery. The allowance of such costs was felt necessary for defense contractors who had major investments in plant and equipment designed for the production of supplies and equipment in support of the Nation's defense programs. The cost principles were apparently not intended to cover the costs of service contractors, nor to provide recovery of the cost of money expended by contractors to obtain working capital.

(c) Bonneville's supply contracts do not normally provide a substantial volume of business for any particular contractor over an extended period, and because contractors are not making major investments primarily or exclusively in support of Bonneville contracts, allowing such costs would be inappropriate. Contractors who do derive a substantial port ion of their activities from Bonneville recover their costs of capital through profits and/or depreciation.

8.11 DEPRECIATION

(a) Depreciation is a charge to current operations which distributes the cost of a tangible capital asset, less estimated residual value, over the estimated useful life of the asset in a systematic and logical manner. It does not involve a process of valuation. Useful life refers to the prospective period of economic usefulness in a particular contractor's operations as distinguished from physical life; it is evidenced by the actual or estimated retirement and replacement practice of the contractor.

(b) Normal depreciation on a contractor's plant, equipment, and other capital facilities is an allowable contract cost, if the contractor is able to demonstrate that it is reasonable and allocable (but see paragraph (h) below).

(c) Depreciation shall be considered reasonable if the contractor follows policies and

procedures that are – (1) Consistent with those followed in the same cost center for business other than

Government; (2) Reflected in the contractor's books of accounts and financial statements; and (3) Both used and acceptable for Federal income tax purposes.

(d) When the depreciation reflected on a contractor's books of accounts and financial statements differs from that used and acceptable for Federal income tax purposes, reimbursement shall be based on the asset cost amortized over the estimated useful

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life of the property using depreciation methods acceptable for income tax purposes. Allowable depreciation shall not exceed the amounts used for book and statement purposes and shall be determined in a manner consistent with the depreciation policies and procedures followed in the same cost center on non-Government business.

(e) Depreciation for reimbursement purposes in the case of tax-exempt organizations shall be determined on the basis described in paragraph (d) immediately above.

(f) Special considerations are required for assets acquired before the effective date of this

cost principle if, on that date, the undepreciated balance of these assets resulting from depreciation policies and procedures used previously for Government contracts and subcontracts is different from the undepreciated balance on the books and financial statements. The undepreciated balance for contract cost purposes shall be depreciated over the remaining life using the methods and lives followed for book purposes. The aggregate depreciation of any asset allowable after the effective date of this 8.11 shall not exceed the cost basis of the asset less any depreciation allowed or allowable under prior acquisition regulations.

(g) Depreciation should usually be allocated to the contract and other work as an indirect cost.

The amount of depreciation allowed in any accounting period may, consistent with the basic objectives in paragraph (a) above, vary with volume of production or use of multi-shift operations.

(h) No depreciation, rental, or use charge shall be allowed on property acquired at no cost from

the Government by the contractor or by any division, subsidiary, or affiliate of the contractor under common control.

(i) The depreciation on any item which meets the criteria for allowance at a "price" under

8.26(e) may be based on that price, provided the same policies and procedures are used for costing all business of the using division, subsidiary, or organization under common control.

(j) No depreciation or rental shall be allowed on property fully depreciated by the contractor

or by any division, subsidiary, or affiliate of the contractor under common control. However, a reasonable charge for using fully depreciated property may be agreed upon and allowed. In determining the charge, consideration shall be given to cost, total estimated useful life at the time of negotiations, effect of any increased maintenance charges or decreased efficiency due to age, and the amount of depreciation previously charged to Government contracts or subcontracts.

(k) Capitalization of tangible assets applies to assets acquired by a "capital lease" as defined

in Statement of Financial Accounting Standard No. 13 (FAS-13), Accounting for Leases, issued by the Financial Accounting Standards Board (FASB). Compliance with 48 CFR 9904.404 and FAS-13 requires that such leased assets (capital leases) be treated as purchased assets; i.e., be capitalized and the capitalized value of such assets be distributed over their useful lives as depreciation charges, or over the leased life as amortization charges as appropriate. Assets whose leases are classified as capital leases under FAS-13 are subject to the requirements of 8.11, while assets acquired under leases classified as operating leases are subject to the requirements on rental costs in 8.36. The standards of financial accounting and reporting prescribed by FAS-13 are

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incorporated into this principle and shall govern its application, except as provided in subparagraphs (1), (2), and (3) below. (1) Rental costs under a sale and leaseback arrangement shall be allowable up to the

amount that would have been allowed had the contractor retained title to the property.

(2) Capital leases for all real and personal property between related parties are subject to the requirements of this subparagraph 8.11(k). If it is determined that the terms of the lease have been significantly affected by the fact that the lessee and lessor are related, depreciation charges shall not be allowed in excess of those which would have occurred if the lease contained terms consistent with those found in a lease between unrelated parties.

(3) Assets acquired under leases that the contractor must capitalize under FAS-13 shall not be treated as purchased assets for contract purposes if the leases are covered by 8.36(b)(4).

(l) In the event of a write-down from carrying value to fair value as a result of impairments

caused by events or changes in circumstances, allowable depreciation of the impaired assets shall be limited to the amounts that would have been allowed had the assets not been written down (see 8.16(g)). However, this does not preclude a change in depreciation resulting from other causes such as permissible changes in estimates of service life, consumption of services, or residual value.

8.12 ECONOMIC PLANNING COSTS

(a) This category includes costs of generalized long-range management planning, that is concerned with the future overall development of the contractor's business, and that may take into account the eventual possibility of economic dislocations or fundamental alterations in those markets in which the contractor currently does business. Economic planning costs do not include organization or reorganization costs covered by 8.27.

(b) Economic planning costs are allowable as indirect costs to be properly allocated. (c) Research and development, and engineering costs designed to lead to new products for

sale to the general public, are not allowable under this provision (see 8.9).

8.13 EMPLOYEE MORALE AND SIMILAR COSTS

(a) Aggregate costs incurred for activities designed to improve working conditions, employer-employee relations, employee morale, and employee performance (less income generated by these activities) are allowable, except as limited by paragraph (b) (c), and (d) immediately below, and to the extent that the net amount is reasonable. Some examples are house publications, health clinics, wellness/fitness centers, employee counseling services, and food and dormitory services, which include operating or furnishing facilities for cafeterias, dining rooms, canteens, lunch wagons, vending machines, living accommodations, or similar types of services for the contractor's employees at or near the contractor's facilities.

(b) Costs of gifts are unallowable. (Gifts do not include awards for performance made pursuant to 8.6(f) or awards made in recognition of employee achievements pursuant to an established contractor plan or policy.)

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(c) Costs of recreation are unallowable, except for the costs of employees' participation in company sponsored sports teams or employee organizations designed to improve company loyalty, team work, or physical fitness.

(d) Losses from operating food and dormitory services may be included as costs only if the

contractor's objective is to operate such services on a break-even basis. Losses sustained because food services or lodging accommodations are furnished without charge or at prices or rates which obviously would not be conducive to the accomplishment of the above objective are not allowable. A loss may be allowed, however, to the extent that the contractor can demonstrate that unusual circumstances exist (e.g., (1) where the contractor must provide food or dormitory services at remote locations where adequate commercial facilities are not reasonably available, or (2) where charged but unproductive labor costs would be excessive but for the services provided or where cessation or reduction of food or dormitory operations will not otherwise yield net cost savings) such that even with efficient management, operating the services on a break-even basis would require charging inordinately high prices, or prices or rates higher than those charged by commercial establishments offering the same services in the same geographical areas. Costs of food and dormitory services shall include an allocable share of indirect expenses pertaining to these activities.

(e) When the contractor has an arrangement authorizing an employee association to provide or operate a service, such as vending machines in the contractor's plant, and retain the profits, such profits shall be treated in the same manner as if the contractor were providing the service (but see paragraph (f) immediately below).

(f) Contributions by the contractor to an employee organization, including funds from vending

machine receipts or similar sources, may be included as costs incurred under paragraph (a) above only to the extent that the contractor demonstrates that an equivalent amount of the costs incurred by the employee organization would be allowable if directly incurred by the contractor.

8.14 ENTERTAINMENT COSTS

Costs of amusement, diversion, social activities, and any directly associated costs such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities are unallowable (but see 8.1 and 8.13). Costs of membership in social, dining, or country clubs or other organizations having the same purposes are also unallowable, regardless of whether the cost is reported as taxable income to the employees.

8.15 FINES, PENALTIES, AND MISCHARGING COSTS

(a) Costs of fines and penalties resulting from violations of, or failure of the contractor to comply with, Federal, State, local or foreign laws and regulations are unallowable except when incurred as a result of compliance with specific terms and conditions of the contract or written instructions from the CO.

(b) Costs incurred in connection with, or related to, the mischarging of costs on Government contracts are unallowable when the costs are caused by, or result from, alteration or destruction of records, or other false or improper charging or recording of costs. Such costs include those incurred to measure or otherwise determine the magnitude of the

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improper charging, and costs incurred to remedy or correct the mischarging, such as the costs to rescreen and reconstruct records.

8.16 GAINS AND LOSSES ON DISPOSITION OF DEPRECIABLE PROPERTY

(a) Gains and losses from the sale, retirement, or other disposition (but see 8.19) of depreciable property shall be included in the year in which they occur as credits or charges to the cost grouping(s) in which the depreciation or amortization applicable to those assets was included (but see paragraph (d) below). However, no gain or loss shall be recognized as a result of the transfer of assets in a business combination.

(b) Gains and losses on disposition of tangible capital assets, including those acquired under capital leases, shall be considered as adjustments of depreciation costs previously recognized. The gain recognized for contract costing purposes shall be limited to the difference between the acquisition cost of the asset and its undepreciated balance (except see subdivision (c)(2)(i) or (ii) below).

(c) Special considerations apply to an involuntary conversion which occurs when a

contractor's property is destroyed by events over which the owner has no control and an insurance award is recovered. The following govern involuntary conversions: (1) When there is a cash award and the converted asset is not replaced, gain or loss shall

be recognized in the period of disposition. The gain recognized for contract costing purposes shall be limited to the difference between the acquisition cost of the asset and its undepreciated balance.

(2) When the converted asset is replaced, the contractor shall either – (i) Adjust the depreciable basis of the new asset by the amount of the total realized

gain or loss; or (ii) Recognize the gain or loss in the period of disposition, in which case the

Government shall participate to the same extent as outlined in subparagraph (c)(1) above.

(d) Gains and losses on the disposition of depreciable property shall not be recognized as a

separate charge or credit when – (1) Gains and losses are processed through the depreciation reserve account and

reflected in the depreciation allowable under 8.11; or (2) The property is exchanged as part of the purchase price of a similar item, and the

gain or loss is taken into consideration in the depreciation cost basis of the new item.

(e) Gains and losses arising from mass or extraordinary sales, retirements, or other disposition other than through business combinations shall be considered on a case-by-case basis.

(f) Gains and losses of any nature arising from the sale or exchange of capital assets other than depreciable property shall be excluded in computing contract costs.

(g) With respect to long-lived tangible and identifiable intangible assets held for use, no loss shall be allowed for a write-down from carrying value to fair value as a result of impairments caused by events or changes in circumstances (e.g., environmental damage, idle facilities arising from a declining business base, etc.). If depreciable property or other capital assets have been written down from carrying value to fair value

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due to impairments, gains or losses upon disposition shall be the amounts that would have been allowed had the assets not been written down.

8.17 IDLE FACILITIES AND IDLE CAPACITY COSTS

(a) Definitions. "Costs of idle facilities or idle capacity" means costs such as maintenance, repair, housing, rent, (e.g., property taxes, insurance, and depreciation), and other related costs. "Facilities" means plant or any portion thereof (including land integral to the operation), equipment, individually or collectively, or any other tangible capital asset, wherever located, and whether owned or leased by the contractor. "Idle capacity" means the unused capacity of partially used facilities. It is the difference between that which a facility could achieve under 100 percent operating time on a one-shift basis, less operating interruptions resulting from time lost for repairs, setups, unsatisfactory materials, and other normal delays, and the extent to which the facility was actually used to meet demands during the accounting period. A multiple-shift basis may be used in the calculation instead of a one-shift basis if it can be shown that this amount of usage could normally be expected for the type of facility involved. "Idle facilities" means completely unused facilities that are excess to the contractor's current needs.

(b) The costs of idle facilities are unallowable unless the facilities – (1) Are necessary to meet fluctuations in workload; or (2) Were necessary when acquired and are now idle because of changes in requirements,

production economies, reorganization, termination, or other causes which could not have been reasonably foreseen. (Costs of idle facilities are allowable for a reasonable period, ordinarily not to exceed 1 year, depending upon the initiative taken to use, lease, or dispose of the idle facilities (but see 8.42)).

(c) Costs of idle capacity are costs of doing business and are a factor in the normal

fluctuations of usage or overhead rates from period to period. Such costs are allowable provided the capacity is necessary or was originally reasonable and is not subject to reduction or elimination by subletting, renting, or sale. Widespread idle capacity throughout an entire plant or among a group of assets having substantially the same function may be idle facilities.

8.18 INDEPENDENT R AND D BID AND PROPOSAL COSTS

(a) [Reserved]

(b) Composition and allocation of costs. (1) IR&D and B&P costs shall be allocated to final cost objectives on the same basis

of allocation used for the general and administrative (G&A) expense grouping of the profit center in which the costs are incurred. However, when IR&D or B&P costs clearly benefit other profit centers or benefit the entire company, those costs shall be allocated through the G&A of the other profit centers or through the corporate G&A, as appropriate.

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(2) If allocations of IR&D or B&P through the G&A base do not provide equitable cost allocation, the CO may approve use of a different base.

(c) Allowability. Except as provided in paragraph (d) below, costs for IR&D and B&P are

allowable only in accordance with the following: (1) Companies required to negotiate advance agreements.

(i) Any company that received payments for IR&D and B&P costs in a fiscal year, either as a prime contractor or subcontractor, exceeding $7 million from Government agencies, is required to negotiate with the Government an advance agreement which establishes a ceiling for allowability of IR&D and B&P costs for the following fiscal year. This agreement is binding on all Government agencies, unless prohibited by statute. The requirements of Section 203 of Public Law 91-441 necessitate that DOD be the lead negotiating agency when the contractor has received more than $7 million in payments for IR&D and B&P from DOD. Computation of IR&D and B&P costs to determine whether the threshold criterion was reached shall include only recoverable IR&D and B&P costs allocated during the company's previous fiscal year to prime contracts and subcontracts for which the submission and certification of cost or pricing data were required. The computation shall include full burdening.

(ii) When a company meets the criterion in (i) above, required advance agreements may be negotiated at the corporate level and/or with those profit centers that contract directly with the Government and that in the preceding year allocated recoverable IR&D and B&P costs exceeding $700,000, including burdening, to contracts and subcontracts for which the submission and certification of cost or pricing data were required. When ceilings are negotiated for separate profit centers of the company, the allowability of IR&D and B&P costs for any center that in its previous fiscal year did not reach the threshold cited above may be determined in accordance with subparagraph (c)(2) below.

(iii) Ceilings are the maximum dollar amounts of total IR&D and B&P costs that will be allowable for allocation over the appropriate base for that part of the company's operation covered by an advance agreement.

(iv) No IR&D and B&P cost shall be allowable if a company fails to initiate negotiation of a required advance agreement prior to the end of the fiscal year for which the agreement is required.

(v) When negotiations are held with a company meeting the $7 million criterion or with separate profit centers (when negotiations are held at that level under (ii) above), and if no advance agreement is reached, payment for IR&D and B&P costs shall be reduced below that which the company or profit center would have otherwise received. The amount of such reduced payment shall not exceed 75 percent of the amount which, in the opinion of the CO, the company or profit center would be entitled to receive under an advance agreement. Written notification of the CO's determination of a reduced amount shall be provided the contractor. In the event that an advance agreement is not reached before the end of the contractor's fiscal year for which the agreement is to apply, negotiations shall immediately be terminated, and the CO shall furnish a determination of the reduced amount.

(vi) Contractors may appeal decisions of the CO to reduce payment. The appeal shall be filed with the CO within 30 days of receipt of the CO's determination.

(2) Companies not required to negotiate advance agreements. Costs for IR&D and B&P are allowable as indirect expenses on contracts to the extent that those costs are allocable and reasonable.

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(d) Deferred IR&D and B&P costs. When appropriate, an agreement may be negotiated

between the contractor and the CO to establish the amounts of IR&D and B&P costs incurred in previous accounting periods that will be allowable.

8.19 INSURANCE AND INDEMNIFICATION

(a) Insurance by purchase or by self-insuring includes coverage the contractor is required to carry, or to have approved, under the terms of the contract and any other coverage the contractor maintains in connection with the general conduct of its business. The amount of insurance costs which may be allowed is subject to the cost limitations and exclusions in the following subparagraphs. (1) Costs of insurance required or approved, and maintained by the contractor pursuant to

the contract, are allowable. (2) Costs of insurance maintained by the contractor in connection with the general

conduct of its business are allowable, subject to the following limitations: (i) Types and extent of coverage shall follow sound business practice, and the rates

and premiums must be reasonable. (ii) Costs allowed for business interruption or other similar insurance must be limited

to exclude coverage of profit. (iii) The cost of property insurance premiums for insurance coverage in excess of

the acquisition cost of the insured assets is allowable only when the contractor has a formal written policy assuring that in the event the insured property is involuntarily converted, the new asset shall be valued at the book value of the replaced asset plus or minus adjustments for differences between insurance proceeds and actual replacement cost. If the contractor does not have such a formal written policy, the cost of premiums for insurance coverage in excess of the acquisition cost of the insured asset is unallowable.

(iv) Costs of insurance for the risk of loss of or damage to Government property are allowable only to the extent that the contractor is liable for such loss or damage and such insurance does not cover loss or damage that results from willful misconduct or lack of good faith on the part of any of the contractor's directors or officers or other equivalent representatives.

(v) Contractors operating under a program of self-insurance must obtain approval of the program when required by the CO.

(vi) Costs of i nsurance on the lives of officers, partners, or proprietors are allowable only to the extent that the insurance represents additional compensation (see 8.6).

(3) Actual losses are unallowable unless expressly provided for in the contract, except – (i) Losses incurred under the nominal deductible provisions of purchased insurance,

in keeping with sound business practice, are allowable for contracts not subject to 48 CFR 9904.416 and when the contractor did not establish a self-insurance program. Such contracts are not subject to the self-insurance requirements of 48 CFR 9904.416. For contracts subject to 48 CFR 9904.416, and for those made subject to the self- insurance requirements of that Standard as a result of the contractor's having established a self- insurance program (see paragraph a) above), actual losses may be used as a basis for charges under a self-insurance program when the actual amount of losses will not differ significantly from the projected average losses for the accounting period (see 48 CFR 9904.416.50(a)(2)(ii)). In those instances where an actual loss has occurred and the present value of the liability is determined under the provisions of 48 CFR

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9904.416-50(a)(3)(ii), the allowable cost shall be limited to an amount computed using as a discount rate the interest rate determined by the Secretary of the Treasury pursuant to 50 USC App. 1215(b)(2) in effect at the time the loss is recognized. However, the full amount of a lump sum settlement to be paid within a year of the date of settlement is allowable.

(ii) Minor losses such as spoilage, breakage and disappearance of small hand tools that occur in the ordinary course of doing business and that are not covered by insurance are allowable.

(4) The cost of insurance to protect the contractor against the costs of correcting its own defects in materials or workmanship is unallowable. However, insurance costs to cover fortuitous or casualty losses resulting from defects in materials or workmanship are allowable as a normal business expense.

(5) Premiums for retroactive or backdated insurance written to cover occurred and known losses are unallowable.

(b) If purchased insurance is available, the charge for any self-insurance coverage plus

insurance administration expenses shall not exceed the cost of comparable purchased insurance plus associated insurance administration expenses.

(c) Insurance provided by captive insurers (insurers owned by or under the control of the contractor) is considered self-insurance, and charges for it must comply with the self-insurance provisions. However, if the captive insurer also sells insurance to the general public in substantial quantities and it can be demonstrated that the charge to the contractor is based on competitive market forces, the insurance will be considered purchased insurance.

(d) The allowability of premiums for insurance purchased from fronting insurance companies

(insurance companies not related to the contractor but who reinsure with a captive insurer of the contractor) shall not exceed the amount (plus reasonable fronting company charges for services rendered) which the contractor would have been allowed had it insured directly with the captive insurer.

(e) Self-insurance charges for risks of catastrophic losses are not allowable. (f) The Government is obligated to indemnify the contractor only to the extent authorized by

law, as expressly provided for in the contract, except as provided in paragraph (a)(3) above.

(g) Late premium payment charges related to employee deferred compensation plan

insurance incurred pursuant to Section 4007 (29 U.S.C. 1307) or Section 4023 (29 U.S.C. 1323) of the Employee Retirement Income Security Act of 1974 are unallowable.

8.20 INTEREST AND OTHER FINANCIAL COSTS

Interest on borrowings (however represented), bond discounts, costs of financing and refinancing capital (net worth plus long-term liabilities), legal and professional fees paid in connection with the preparation of prospectuses, costs of preparation and issuance of stock rights, and directly associated costs are unallowable except for interest assessed by State or local taxing authorities under the conditions specified in 8.41 (but see 8.28).

8.21 LABOR RELATIONS COSTS

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(a) Costs incurred in maintaining satisfactory relations between the contractor and its employees (other than those made unallowable in paragraph (b) of this section), including costs of shop stewards, labor management committees, employee publications, and other related activities, are allowable.

(b) As required by Executive Order 13494, Economy in Government Contracting, costs of any activities undertaken to persuade employees, of any entity, to exercise or not to exercise, or concerning the manner of exercising, the right to organize and bargain collectively through representatives of the employees’ own choosing are unallowable. Examples of unallowable costs under this paragraph include, but are not limited to, the costs of – (1) Preparing and distributing materials; (2) Hiring or consulting legal counsel or consultants; (3) Meetings (including paying the salaries of the attendees at meetings held for this purpose); and (4) Planning or conducting activities by managers, supervisors, or union representatives during work hours.

8.22 LOBBYING AND POLITICAL ACTIVITY COSTS

(a) Costs associated with the following activities are unallowable: (1) Attempts to influence the outcomes of any Federal, State, or local election,

referendum, initiative, or similar procedure, through in-kind or cash contributions, endorsements, publicity, or similar activities;

(2) Establishing, administering, contributing to, or paying the expenses of a political party, campaign, political action committee or other organization established for the purpose of influencing the outcomes of elections;

(3) Any attempt to influence (i) the introduction of Federal, state, or local legislation, or (ii) the enactment or modification of any pending Federal, state, or local legislation through communication with any member or employee of the Congress or state legislature (including efforts to influence state or local officials to engage in similar lobbying activity), or with any government official or employee in connection with a decision to sign or veto enrolled legislation;

(4) Any attempt to influence (i) the introduction of Federal, state, or local legislation, or (ii) the enactment or modification of any pending Federal, state, or local legislation by preparing, distributing or using publicity or propaganda, or by urging members of the general public or any segment thereof to contribute to or participate in any mass demonstration, march, rally, fund raising drive, lobbying campaign or letter writing or telephone campaign;

(5) Legislative liaison activities, including attendance at legislative sessions or committee hearings, gathering information regarding legislation, and analyzing the effect of legislation, when such activities are carried on in support of or in knowing preparation for an effort to engage in unallowable activities; or

(6) Costs incurred in attempting to improperly influence (see Part 3.5), either directly or indirectly, an employee or officer of the Executive branch of the Federal Government to give consideration to or act regarding a regulatory or contract matter.

(b) The following activities are excepted from the coverage of (a) above:

(1) Providing a technical and factual presentation of information on a topic directly related to the performance of a contract through hearing testimony, statements or letters to the Congress or a state legislature, or subdivision, member, or cognizant staff member thereof, in response to a documented request (including a Congressional Record notice requesting testimony or statements for the record at a regularly scheduled hearing) made by the recipient member, legislative body or subdivision,

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or a cognizant staff member thereof; provided such information is readily obtainable and can be readily put in deliverable form; and further provided that costs under this section for transportation, lodging or meals are unallowable unless incurred for the purpose of offering testimony at a regularly scheduled Congressional hearing pursuant to a written request for such presentation made by the Chairman or Ranking Minority Member of the Committee or Subcommittee conducting such hearing.

(2) Any lobbing made unallowable by (a)(3) above to influence state or local legislation in order to directly reduce contract cost, or to avoid material impairment of the contractor's authority to perform the contract.

(3) Any activity specifically authorized by statute to be undertaken with funds from the contract.

(c) When a contractor seeks reimbursement for indirect costs, total lobbying costs shall be

separately identified in the indirect cost rate proposal, and thereafter treated as other unallowable activity costs.

(d) Contractors shall maintain adequate records to demonstrate that the certification of costs as being allowable, or unallowable (see 14.17), pursuant to this subsection complies with the requirements of this subsection.

(e) Existing procedures should be utilized to resolve in advance any significant questions or disagreements concerning the interpretation or application of the subsection.

8.23 LOSSES ON OTHER CONTRACTS

An excess of costs over income under any other contract (including the contractor’s contributed portion under cost-sharing contracts) is unallowable.

8.24 MAINTENANCE AND REPAIR COSTS

(a) Costs necessary for the upkeep of property (including Government property, unless otherwise provided for) that neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are to be treated as follows (but see 8.11): (1) Normal maintenance and repair costs are allowable. (2) Extraordinary maintenance and repair costs are allowable, provided those costs are

allocated to the applicable periods for purposes of determining contract costs.

(b) Expenditures for plant and equipment, including rehabilitation which should be capitalized and subjected to depreciation, are allowable only on a depreciation basis.

8.25 MANUFACTURING AND PRODUCTION ENGINEERING COSTS

Costs of manufacturing and production engineering, including engineering activities in connection with the following, are allowable:

(a) Current manufacturing processes – Methods analysis, job analysis, motion and time study, and tool design and improvement.

(b) Current production problems – Materials analysis for production suitability and component design for simplifying production.

8.26 MATERIAL COSTS

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(a) Material costs include the costs of such items as raw materials, parts, sub-assemblies, components, and manufacturing supplies, whether purchased or manufactured, and may include such collateral items as inbound transportation and in-transit insurance. In computing material costs, consideration shall be given to reasonable overruns, spoilage, or defective work (unless otherwise provided in any contract provision relating to inspection and correction of defective work). These costs are allowable, subject to the provisions of (b) through (e) below.

(b) Costs of material shall be adjusted for income and other credits, including trade discounts, refunds, rebates, allowances, cash discounts, and credits for scrap, salvage, and material returned to vendors. Such income and other credits shall either be credited directly to the cost of the material or be allocated as a credit to indirect costs. When the contractor can demonstrate that failure to take cash discounts was reasonable, lost discounts need not be credited.

(c) Reasonable adjustments arising from differences between periodic physical inventories

and book inventories may be included in arriving at costs; provided, such adjustments relate to the period of contract performance.

(d) When materials are purchased specifically for and are identifiable solely with performance

under a contract, the actual purchase cost should be charged to the contract. If material is issued from stores, any generally recognized method of pricing is acceptable if that method is consistently applied and the results are equitable. When estimates of future materials costs are required, current market price or anticipated acquisition cost may be used, but the basis of pricing must be disclosed.

(e) Allowance for all materials, supplies, and services sold or transferred between any

divisions, subsidiaries, or affiliates of the contractor under a common control shall be on the basis of cost incurred in accordance with this subpart. However, allowance may be at a price when it is the established practice of the transferring organization to price interorganizational transfers at other than cost for commercial work of the contractor or any division, subsidiary, or affiliate of the contractor under a common control, and when the price – (1) Is, or is based on, an "established catalog or market price of commercial items sold

in substantial quantities to the general public", or (2) Is the result of "adequate price competition" and is the price at which an award was

made to the affiliated organization after obtaining quotations on an equal basis from such organization and one or more outside sources which produce the item or its equivalent in significant quantity.

(3) Provided that either subparagraphs (1) or (2) above apply only when – (i) The price is not in excess of the transferor's current sales price to the most

favored customer (including any division, subsidiary or affiliate of the contractor under a common control) for a like quantity under comparable conditions; and

(ii) The CO has not determined the price to be unreasonable.

(f) The price determined in accordance with paragraph (e)(1) above and Part 12.5.4 should be adjusted to reflect the quantities being acquired and may be adjusted to reflect actual cost of any modifications necessary because of contract requirements.

8.27 ORGANIZATIONAL COSTS

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(a) Except as provided in paragraph (b) of this subsection, expenditures in connection with (1) planning or executing the organization or reorganization of the corporate structure of a business, including mergers and acquisitions, (2) resisting or planning to resist the reorganization of the corporate structure of a business or a change in the controlling interest in the ownership of a business, and (3) raising capital (net worth plus long-term liabilities), are unallowable. Such expenditures include but are not limited to incorporation fees and costs of attorneys, accountants, brokers, promoters and organizers, management consultants and investment counselors, whether or not employees of the contractor. Unallowable "reorganization" costs include the cost of any change in the contractor's financial structure, excluding administrative costs of short-term borrowings for working capital, resulting in alterations in the rights and interests of security holders, whether or not additional capital is raised.

(b) The cost of activities primarily intended to provide compensation will not be considered organizational costs subject to this subjection, but will be governed by 8.6. These activities include acquiring stock for (1) executive bonuses, (2) employee savings plans, and (3) employee stock ownership plans.

8.28 OTHER BUSINESS EXPENSES

The following types of costs are allowable when allocated on an equitable basis:

(a) Registry and transfer charges resulting from changes in ownership of securities issued by the contractor.

(b) Cost of shareholders' meetings.

(c) Normal proxy solicitations.

(d) Preparing and publishing reports to shareholders.

(e) Preparing and submitting required reports and forms to taxing and other regulatory bodies.

(f) Incidental costs of directors' and committee meetings.

(g) Other similar costs.

8.29 PLANT PROTECTION COSTS

Costs of items such as (a) wages, uniforms, and equipment of personnel engaged in plant protection, (b) depreciation on plant protection capital assets, and (c) necessary expenses to comply with military requirements, are allowable.

8.30 PATENT COSTS

(a) The following patent costs are allowable to the extent that they are incurred as requirements of a Government contract: (1) Costs of preparing invention disclosures, reports, and other documents. (2) Costs for searching the art to the extent necessary to make the invention

disclosures. (3) Other costs in connection with the filing and prosecution of a United States patent

application where title or royalty-free license is to be conveyed to the Government.

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(b) General counseling services relating to patent matters are allowable.

(c) Other than those for general counseling services, patent costs not required by the contract

are unallowable.

8.31 [RESERVED]

8.32 PRECONTRACT COSTS

Precontract costs are those incurred prior to the effective date of the contract directly pursuant to the negotiation and in anticipation of the contract award when necessary to comply with the proposed contract delivery schedule. Such costs are allowable to the extent that they would have been allowable if incurred after the date of the contract.

8.33 PROFESSIONAL AND CONSULTANT SERVICE COSTS

(a) Definition. "Professional and consultant services" are those services rendered by persons who are members of a particular profession or possess a special skill and who are not officers or employees of the contractor. Examples include those services acquired by contractors or subcontractors in order to enhance their legal, economic, financial, or technical positions. Professional and consultant services are generally acquired to obtain information, advice, opinions, alternatives, conclusions, recommendations, training, or direct assistance, such as studies, analyses, evaluations, liaison with Government officials, or other forms of representation.

(b) Costs of professional and consultant services are allowable subject to this paragraph and paragraphs [c] through [f] of this subsection when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Government [but see 8.30].

(c) Costs of professional and consultant services performed under any of the following

circumstances are unallowable: (1) Services to improperly obtain, distribute, or use information or data protected by law

or regulation. (2) Services that are intended to improperly influence the contents of solicitations, the

evaluation of proposals or quotations, or the selection of sources for contract award, whether award is by the Government, or by a prime contractor or subcontractor.

(3) Any other services obtained, performed, or otherwise resulting in violation of any statute or regulation prohibiting improper business practices or conflicts of interest.

(4) Services performed which are not consistent with the purpose and scope of the services contracted for or otherwise agreed to.

(d) In determining the allowability of costs [including retainer fees] in a particular case, no

single factor or any special combination of factors is necessarily determinative. However, the CO shall consider the following factors, among others: (1) The nature and scope of the service rendered in relation to the service required, (2) The necessity of contracting for the service, considering the contractor's capability in

the particular area, (3) The past pattern of acquiring such services and their costs, particularly in the

years prior to the award of Government contracts. (4) The impact of Government contracts on the contractor's business.

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(5) Whether the proportion of Government work to the contractor's total business is such as to influence the contractor in favor of incurring the cost, particularly when the services rendered are not of a continuing nature and have little relationship to work under Government contracts.

(6) Whether the service can be performed more economically by employment rather than by contracting.

(7) The qualifications of the individual or concern rendering the service and the customary fee charged, especially on nongovernment contracts.

(8) Adequacy of the contractual agreement for the service [e.g., description of the service, estimate of time required, rate of compensation, termination provisions].

(e) Retainer fees, to be allowable, must be supported by evidence that--

(1) The services covered by the retainer agreement are necessary and customary; (2) The level of past services justifies the amount of the retainer fees [if no services

were rendered, fees are not automatically unallowable]; (3) The retainer fee is reasonable in comparison with maintaining an in-house capability

to perform the covered services, when factors such as cost and level of expertise are considered; and

(4) The actual services performed are documented in accordance with paragraph [f] of this subsection.

(f) Fees for services rendered shall be allowable only when supported by evidence of the

nature and scope of the service furnished. [See also 8.38(g).] However, retainer agreements generally are not based on specific statements of work. Evidence necessary to determine that work performed is proper and does not violate law or regulation shall include: (1) Details of all agreements [e.g., work requirements, rate of compensation, and nature

and amount of other expenses, if any] with the individuals or organizations providing the services and details of actual services performed;

(2) Invoices or billings submitted by consultants, including sufficient detail as to the time expended and nature of the actual services provided; and

(3) Consultants' work products and related documents, such as trip reports indicating persons visited and subjects discussed, minutes of meetings, and collateral memoranda and reports.

8.34 RECRUITMENT COSTS

(a) Subject to paragraphs (b) and (c) below, and provided that the size of the staff recruited and maintained is in keeping with workload requirements, the following costs are allowable: (1) Costs of help-wanted advertising. (2) Costs of operating an employment office needed to secure and maintain an

adequate labor force. (3) Costs of operating an aptitude and educational testing program. (4) Travel costs of employees engaged in recruiting personnel. (5) Travel costs of applicants for interviews. (6) Costs for employment agencies, not in excess of standard commercial rates.

(b) Help-wanted advertising costs are unallowable if the advertising – (1) Is for personnel other than those required to perform obligations under a Government

contract; (2) Does not describe specific positions or classes of positions;

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(3) Is excessive relative to the number and importance of the positions or to the industry practices;

(4) Includes material that is not relevant for recruitment purposes; (5) Is designed to "pirate" personnel from another Government contractor; or (6) Includes color (in publications).

(c) Excessive compensation costs offered to prospective employees to "pirate" them from another Government contractor are unallowable. Such excessive costs may include salaries, fringe benefits, or special emoluments which are in excess of standard industry practices or the contractor's customary compensation practices.

8.35 RELOCATION COSTS

(a) Relocation costs are costs incident to the permanent change of duty assignment (for an indefinite period or for a stated period, but in either event for not less than 12 months) of an existing employee or upon recruitment of a new employee. The following types of relocation costs are allowable as noted, subject to paragraphs (b) and (f) below: (1) Cost of travel of the employee and members of the immediate family (see 8.46) and

transportation of the household and personal effects to the new location. (2) Cost of finding a new home, such as advance trips by employees and spouses to

locate living quarters, and temporary lodging during transition periods not exceeding separate cumulative totals of 60 days for employees and 45 days for spouses and dependents, including advance trip time.

(3) Closing costs (i.e., brokerage fees, legal fees, appraisal fees, points, finance charges, etc.) incident to the disposition of actual residence owned by the employee when notified of transfer, except that these costs when added to the costs described in subparagraph (a)(4) below shall not exceed 14 percent of the sales price of the property sold.

(4) Continuing costs of ownership of the vacant former actual residence being sold, such as maintenance of building and grounds (exclusive of fixing-up expenses), utilities, taxes, property insurance, mortgage interest, after settlement date or lease date of new permanent residence, except that these costs when added to the costs described in subparagraph (a)(3) above, shall not exceed 14 percent of the sales price of the property sold.

(5) Other necessary and reasonable expenses normally incident to relocation, such as disconnecting and connecting household appliances; automobile registration; driver's license and use taxes; cutting and fitting rugs, draperies, and curtains; forfeited utility fees and deposits; and purchase of insurance against damage to or loss of personal property while in transit.

(6) Costs incident to acquiring a home in a new location, except that (i) these costs will not be allowable for existing employees or newly recruited employees who, before the relocation, were not homeowners and (ii) the total costs shall not exceed 5 percent of the purchase price of the new home.

(7) Mortgage interest differential payments, except that these costs are not allowable for existing or newly recruited employees who, before the relocation, were not homeowners and the total payments are limited to an amount determined as follows: (i) The difference between the mortgage interest rates of the old and new

residences times the current balance of the old mortgage times 3 years. (ii) When mortgage differential payments are made on a lump sum basis and the

employee leaves or is transferred again in less than 3 years, the amount initially

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recognized shall be proportionately adjusted to reflect payments only for the actual time of the relocation.

(8) Rental differential payments covering situations where relocated employees retain ownership of a vacated home in the old location and rent at the new location. The rented quarters at the new location must be comparable to those vacated, and the allowable differential payments may not exceed the actual rental costs for the new home, less the fair market rent for the vacated home times 3 years.

(9) Cost of canceling an unexpired lease.

(b) The costs described in paragraph (a) above must also meet the following criteria to be considered allowable: (1) The move must be for the benefit of the employer. (2) Reimbursement must be in accordance with an established policy or practice that is

consistently followed by the employer and is designed to motivate employees to relocate promptly and economically.

(3) The costs must not otherwise be unallowable under this Appendix. (4) Amounts to be reimbursed shall not exceed the employee's actual expenses, except

that for miscellaneous costs of the type discussed in subparagraph (a)(5) above, a flat amount, not to exceed $1,000, may be allowed in lieu of actual costs.

(c) The following types of costs are not allowable:

(1) Loss on sale of a home. (2) Costs incident to acquiring a home in a new location as follows:

(i) Real estate brokers fees and commissions. (ii) Cost of litigation. (iii) Real and personal property insurance against damage or loss of property. (iv) Mortgage life insurance. (v) Owner's title policy insurance when such insurance was not previously carried by

the employee on the old residence (however, cost of a mortgage title policy is allowable).

(vi) Property taxes and operating or maintenance costs. (3) Continuing mortgage principal payments on residence being sold. (4) Payments for employee income or FICA (social security) taxes incident to

reimbursed relocation costs. (5) Payments for job counseling and placement assistance to employee spouses and

dependents who were not employees of the contractor at the old location. (6) Costs incident to furnishing equity or nonequity loans to employees or making

arrangements with lenders for employees to obtain lower-than-market rate mortgage loans.

(d) If relocation costs for an employee have been allowed either as an allocable indirect or

direct cost, and the employee resigns within 12 months for reasons within the employee's control, the contractor shall refund or credit the relocation costs to the Government.

(e) Subject to the requirements of paragraphs (a) through (d) above, the costs of family movements and of personnel movements of a special or mass nature are allowable. The cost, however, should be assigned on the basis of work (contracts) or time period benefited.

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(f) Relocation costs (both outgoing and return) of employees who are hired for performance on specific contracts or long-term field projects are allowable if -- (1) The term of employment is not less than 12 months; (2) The employment agreement specifically limits the duration of employment to the time

spent on the contract or field project for which the employee is hired; (3) The employment agreement provides for return relocation to the employee's permanent

and principal home immediately prior or the outgoing relocation, or other location of equal or lesser cost; and

(4) The relocation costs are determined under the rules of paragraphs (a) through (d) above. However, the costs to return employees, who are released from employment upon completion of field assignments pursuant to their employment agreements, are not subject to the refund or credit requirement of paragraph (d).

8.36 RENTAL COSTS

(a) This subsection is applicable to the cost of renting or leasing real or personal property, except ADPE, acquired under "operating leases" as defined in Statement of Financial Accounting Standards No. 13 (FAS-13), Accounting for Leases. Compliance with 8.11(m) requires assets acquired by means of capital leases, as defined in FAS-13 shall be treated as purchased assets.

(b) The following costs are allowable: (1) Rental costs under operating leases, to the extent that the rates are reasonable at

the time of the lease decision, after consideration of: (i) rental costs of comparable property, if any; (ii) market conditions in the area; (iii) the type, life expectancy, condition, and value of the property leased; (iv) alternatives available; and (v) other provisions of the agreement.

(2) Rental costs under a sale and leaseback arrangement only up to the amount the contractor would be allowed if the contractor retained title.

(3) Charges in the nature of rent for property between any divisions, subsidiaries, or organization under common control, to the extent that they do not exceed the normal costs of ownership nor duplicate any other allowed cost. Rental cost of personal property leased from any division, subsidiary, or affiliate of the contractor under common control, that has an established practice of leasing the same or similar property to unaffiliated lessees shall be allowed in accordance with subparagraph (b)(1) above.

(4) [Reserved.]

(c) The allowability of rental costs under unexpired leases in connection with terminations is treated in 8.42(e).

8.37 ROYALTIES AND OTHER COSTS FOR USE OF PATENTS

(a) Royalties on a patent or amortization of the cost of purchasing a patent or patent rights necessary to satisfy contract obligations are allowable unless – (1) The Government has a license or the right to a free use of the patent; (2) The patent is invalid due to adjudication or administrative determination; (3) The patent is considered to be unenforceable; or (4) The patent is expired.

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(b) Care should be exercised in determining reasonableness when the royalties may have been arrived at as a result of less-than-arm's-length bargaining; e.g., royalties – (1) Paid to persons, including corporations, affiliated with the contractor; (2) Paid to unaffiliated parties, including corporations, under an agreement entered into in

contemplation that a Government contract would be awarded; or (3) Paid under an agreement entered into after the award of the contract.

(c) In any case involving a patent formerly owned by the contractor, the royalty amount

allowed should not exceed the cost which would have been allowed had the contractor retained title.

8.38 SELLING COSTS

(a) "Selling" is a generic term encompassing all efforts to market the contractor's products or services, some of which are covered specifically in other subsections of Section 8. Selling activity includes the following broad categories: (1) Advertising. (2) Corporate image enhancement, including broadly-targeted sales efforts, other than

advertising. (3) Bid and proposal costs. (4) Market planning. (5) Direct selling.

(b) Advertising costs are defined at 8.1(b) and are subject to the allowability provisions of 8.1(d) and (f). Corporate image enhancement activities are included within the definitions of public relations at 8.1(a) and entertainment at 8.14, and are subject to the allowability provisions at 8.1(e) and (f) and 8.14, respectively. Bid and proposal costs are defined at 8.18 and have their allowability controlled by that subsection. Market planning involves market research and analysis and generalized management planning concerned with development of the contractor's business. The allowability of long-range market planning costs is controlled by the provisions of 8.12. Other market planning costs are allowable to the extent that they are reasonable. Costs of activities which are correctly classified and disallowed under cost principles referenced in this paragraph (b) are not to be reconsidered for reimbursement under any other provision of this subsection.

(c) Direct selling efforts are those acts or actions to induce particular customers to purchase particular products or services of the contractor. Direct selling is characterized by person-to-person contact and includes such activities as familiarizing a potential customer with the contractor's products or services, conditions of sale, service capabilities, etc. It also includes negotiation, liaison between customer and contractor personnel, technical and consulting activities, individual demonstrations, and any other activities having as their purpose the application or adaptation of the contractor's products or services for a particular customer's use. The cost of direct selling efforts is allowable if reasonable in amount.

(d) The costs of any selling efforts other than those addressed in paragraphs (b) or (c) of

this subsection are unallowable. (e) Costs of the type identified in paragraphs (b), (c), and (d) of this subsection are often

commingled on the contractor's books in the selling expense account because these activities are performed by the sales departments. However, identification and segregation

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of unallowable costs is required under the provisions of 8.6 and 48 CFR 9904.405, and such costs are not allowable merely because they are incurred in connection with allowable selling activities.

(f) Notwithstanding any other provision of this subsection, sellers' or agents' compensation,

fees, commissions, percentages, and retainer or brokerage fees, whether or not contingent upon the award of contracts, are allowable only when paid to bona fide employees or established commercial or selling agencies maintained by the contractor for the purpose of securing business.

8.39 SERVICE AND WARRANTY COSTS

Service and warranty costs incurred in fulfilling any contractual obligation are allowable when not inconsistent with the terms of the contract. However, care should be taken to avoid duplication of the allowance as an element of both risk and estimated product cost.

8.40 SPECIAL TOOLING AND SPECIAL TEST EQUIPMENT COSTS

(a) The cost of special tooling and special test equipment is allowable and shall be allocated to the Government contracts for which acquired, except that the cost of items acquired by the contractor prior to the effective date of the contract (or replacement of such items), whether or not altered or adapted for the contract, and items which the contract schedule specifically excludes shall be allowable only as depreciation or amortization.

(b) When items are disqualified as special tooling or special test equipment because with minor expense they can be made suitable for general purpose use and have a value as such commensurate with their value as special tooling or test equipment, the cost of adapting the items for use under the contract and the cost of returning them to their prior configuration are allowable.

8.41 TAXES

(a) The following types of costs are allowable: (1) Federal, State and local taxes, except as otherwise provided in paragraph (b) below

that are required to be and are paid or accrued in accordance with generally accepted accounting principles. Fines and penalties are not considered taxes.

(2) Taxes otherwise allowable under subparagraph (a)(1) above, but upon which a claim of illegality or erroneous assessment exists; provided the contractor, before paying such taxes – (i) Promptly requests instructions from the CO concerning such taxes; and (ii) Takes all action directed by the CO arising out of subparagraph (2)(i) above or an

independent decision of the Government as to the existence of a claim of illegality or erroneous assessment, to (A) determine the legality of the assessment or (B) secure a refund of such taxes.

(3) The reasonable cost of any action taken by the contractor at the direction or with the concurrence of the CO. Interest or penalties incurred by the contractor for non-payment of any tax at the direction of the CO or by reason of the failure of the CO to insure timely direction after a prompt request.

(b) The following types of costs are not allowable:

(1) Federal income and excess profits taxes.

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(2) Taxes in connection with financing, refinancing, refunding operations, or reorganizations.

(3) Taxes from which exemptions are available to the contractor directly or based on an exemption afforded the Government, except when the CO determines that the administrative burden incident to obtaining the exemption outweighs the corresponding benefits accruing to the Government. When partial exemption from a tax is attributable to Government contract activity, taxes charged to such work in excess of that amount resulting from application of the preferential treatment are unallowable. These provisions assure that any tax preference attributable to Government contract activity be realized by the Government. The term "exemption" means freedom from taxation in whole or in part and includes a tax abatement or reduction resulting from mode of assessment, method of calculation, or otherwise.

(4) Special assessments on land that represent capital improvements. (5) Taxes (including excises) on real or personal property, or on the value, use,

possession or sale thereof, which is used solely in connection with work other than on Government contracts (see paragraph (c) below).

(6) Any excise tax in subtitle D, chapter 43 of the Internal Revenue Code of 1986, as amended. That chapter includes excise taxes imposed in connection with qualified pension plans, welfare plans, deferred compensation plans, or other similar types of plans.

(7) Income tax accruals designed to account for the tax effects of differences between taxable income and pretax income as reflected by the books of account and financial statements.

(c) Taxes on property used solely in connection with either non-Government or Government

work should be considered directly applicable to the respective category of work unless the amounts involved are insignificant, or comparable results would otherwise be obtained; e.g., taxes on contractor-owned work-in- process which is used solely in connection with non-Government work should be allocated to such work; taxes on contractor-owned work-in-process inventory (and Government-owned work-in-process inventory when taxed) used solely in connection with Government work should be charged to such work. The cost of taxes incurred on property used in both Government and non-Government work shall be apportioned to all such work based upon the use of such property.

(d) Any taxes, interest, or penalties that were allowed as contract costs and are refunded to the contractor shall be credited or paid to the Government in the manner it directs.

8.42 TERMINATION COSTS

Contract terminations generally give rise to the incurrence of costs or the need for special treatment of costs that would not have arisen had the contract not been terminated. The following cost principles are to be used in conjunction with the others in this Appendix:

(a) Common items. The cost of items reasonably usable on the contractor's other work shall not be allowable unless the contractor submits evidence that the items could not be retained at cost without sustaining a loss. The CO should consider the contractor's plans and orders for current and planned production when determining if items can reasonably be used on other work of the contractor.

(b) Costs continuing after termination. Costs which cannot be discontinued immediately after the effective date of termination are generally allowable. However, any costs continuing after

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the effective date of the termination due to the negligence or willful failure of the contractor to discontinue the costs shall be unallowable.

(c) Initial costs. Initial costs including starting load and preparatory costs, are allowable as

follows: (1) Starting load costs are nonrecurring labor, material, and related overhead costs

that are incurred in the early part of production and result from factors such as – (i) Excessive spoilage due to inexperienced labor; (ii) Idle time and lower-than-expected production due to testing and changing

production methods; (iii) Training; and (iv) Lack of familiarity or experience with the product, materials, or processes.

(2) Preparatory costs include such costs as those incurred for initial plant rearrangement and alterations, management and personnel organization, and production planning. They do not include special machinery and equipment and starting load costs.

(3) When initial costs are included in the settlement proposal as a direct charge, such costs shall not also be included in overhead. Initial costs attributable to only one contract shall not be allocated to other contracts.

(4) If initial costs are claimed and have not been segregated on the contractor's books, they shall be segregated for settlement purposes from cost reports and schedules reflecting the high unit cost incurred during the early stages of the contract.

(5) If the settlement proposal is on the inventory basis, initial costs should normally be allocated on the basis of total end items called for by the contract immediately prior to termination; however, if the contract includes end items of a diverse nature, some other equitable basis may be used, such as machine or labor hours.

(d) Loss of useful value. Loss of useful value of special tooling, and special machinery and

equipment is generally allowable, provided – (1) The special tooling, or special machinery and equipment is not reasonably capable

of use in the other work of the contractor; (2) The Government's interest is protected by transfer of title or by other means deemed

appropriate by the CO; and (3) The loss of useful value for any one terminated contract is limited to that portion of the

acquisition cost which bears the same ratio to the total acquisition cost as the terminated portion of the contract bears to the entire terminated contract and other Government contracts for the which the special tooling, or special machinery and equipment was acquired.

(e) Rental under unexpired leases. Rental costs under unexpired leases, less the residual

value of such leases, are generally allowable when shown to have been reasonably necessary for the performance of the terminated contract, if – (1) The amount of rental claimed does not exceed the reasonable use value of the

property leased for the period of the contract and such further period as may be reasonable; and

(2) The contractor makes all reasonable efforts to terminate, assign, settle, or otherwise reduce the cost of such lease.

(f) Alterations of leased property. The cost of alterations and reasonable restorations

required by the lease may be allowed when the alterations were necessary for the performance of the contract.

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(g) Settlement expenses. (1) Settlement expenses, including the following, are generally allowable:

(i) Accounting, legal, clerical, and similar costs reasonably necessary for – (A) The preparation and presentation, including supporting data, of settlement

claims to the CO; and (B) The termination and settlement of subcontracts.

(ii) Reasonable costs for the storage, transportation, protection, and disposition of property acquired or produced for the contract.

(iii) Indirect costs related to salary and wages incurred as settlement expenses in (i) and (ii); normally, such as indirect costs shall be limited to payroll taxes, fringe benefits, occupancy costs, and immediate supervision costs.

(2) If settlement expenses are significant, a cost account or work order shall be established to separately identify and accumulate them.

(h) Subcontractor claims. Subcontractor claims, including the allocable portion of claims common to the contract and to other work of the contractor, are generally allowable. An appropriate share of the contractor's indirect expense may be allocated to the amount of settlements with subcontractors; provided that the amount allocated is reasonably proportionate to the relative benefits received. The indirect expense so allocated shall exclude costs claimed directly or indirectly as settlement expenses.

8.43 TRADE, BUSINESS, TECHNICAL, AND PROFESSIONAL ACTIVITY COSTS

The following types of costs are allowable:

(a) Memberships in trade, business, technical, and professional organizations.

(b) Subscriptions to trade, business, professional, or other technical periodicals. (c) When the principal purpose of a meeting, convention, conference, symposium, or

seminar is the dissemination of trade, business, technical or professional information or the stimulation of production or improved productivity: (1) Costs of organizing, setting up, and sponsoring the meetings, conventions,

symposia, etc., including rental of meeting facilities, transportation, subsistence, and incidental costs;

(2) Costs of attendance by contractor employees, including travel costs (see 8.46); and (3) Costs of attendance by individuals who are not employees of the contractor,

provided (i) such costs are not also reimbursed to the individual by the employing company or organization, and (ii) the individuals’ attendance is essential to achieve the purpose of the conference, meeting, convention, symposium, etc.

8.44 TRAINING AND EDUCATION COSTS

(a) Allowable costs. Training and education costs are allowable to the extent indicated below.

(b) Vocational training. Costs of preparing and maintaining a non-college level program of instruction, but not limited to on-the-job, classroom, and apprenticeship training, designed to increase the vocational effectiveness of employees are allowable. These costs include: (1) salaries or wages of trainees (excluding overtime compensation), (2) salaries of the director of training and staff when the training program is conducted by

the contractor,

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(3) tuition and fees when the training is in an institution not operated by the contractor, and/or

(4) training materials and textbooks. (c) Part-time college-level education. Allowable costs of part-time college education at an

undergraduate or postgraduate level, including that provided at the contractor's own facilities, are limited to – (1) Fees and tuition charged by the educational institution, or, instead of tuition,

instructor's salaries and the related share of indirect cost of the educational institution, to the extent that the sum thereof is not in excess of the tuition that would have been paid to the participating educational institution;

(2) Salaries and related costs of instructors who are employees of the contractor; (3) Training materials and textbooks; and (4) Straight-time compensation of each employee for time spent attending classes during

working hours not in excess of 156 hours per year where circumstances do not permit the operation of classes or attendance at classes after regular working hours.

(d) Full-time education. Costs of tuition, fees, training materials and textbooks (but not

subsistence, salary, or any other emoluments) in connection with full-time education, including that provided at the contractor's own facilities, at a postgraduate but not undergraduate college level, are allowable only when the course or degree pursued is related to the field in which the employee is working or may reasonably be expected to work and are limited to a total period not to exceed two school years or the length of the degree program, whichever is less, for each employee so trained.

(e) Specialized programs. Costs of attendance of up to 16 weeks per employee per year at specialized programs specifically designed to enhance the effectiveness of managers or to prepare employees for such positions are allowable. Such costs include enrollment fees and related charges and employees' salaries, subsistence, training materials, textbooks, and travel. Costs allowable under this paragraph do not include costs for courses that are part of a degree-oriented curriculum, which are only allowable pursuant to paragraphs (c) and (d) of this subsection.

(f) Other expenses. Maintenance expense and normal depreciation or fair rental on

facilities owned or leased by the contractor for training purposes are allowable in accordance with 8.11, 8.17, 8.24, and 8.36.

(g) Grants. Grants to educational or training institutions, including the donation of facilities or

other properties, scholarships, and fellowships are considered contributions and are unallowable.

(h) Advance agreements.

(1) Training and education costs in excess of those otherwise allowable under (c) and (d) of this subsection, including subsistence, salaries, or any other emoluments, may be allowed to the extent set forth in an advance agreement negotiated under Section 1. To be considered for an advance agreement, the contractor must demonstrate that the costs are consistently incurred under an established managerial, engineering, or scientific training and education program and that the course or degree pursued is related to the field in which the employees are now working or may reasonably be expected to work. Before entering into the advance agreement, the CO shall give consideration to such factors as – (i) The length of employees' service with the contractor;

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(ii) Employees' past performance and potential; (iii) Whether employees are in formal development programs; and (iv) The total number of participating employees.

(2) Any advance agreement must include a provision requiring the contractor to refund to the Government training and education costs for employees who resign within 12 months of completion of such training or education for reasons within an employee's control.

(i) Training or education costs for other than bona fide employees. Costs of tuition, fees,

textbooks, and similar or related benefits provided for other than bona fide employees are unallowable, except that the costs incurred for educating employee dependents (primary and secondary level studies) when the employee is working in a foreign country where public education is not available and where suitable private education is inordinately expensive may be included in overseas differential.

(j) Employee dependent education plans. Costs of college plans for employee dependents are unallowable.

8.45 TRANSPORTATION COSTS

Allowable transportation costs include freight, express, cartage, and postage charges relating to goods purchased, in process, or delivered. When these costs can be identified with the items involved, they may be directly costed as transportation costs or added to the cost of such items. When identification with the materials received cannot be made, inbound transportation costs may be charged to the appropriate indirect cost accounts if the contractor follows a consistent and equitable procedure. Outbound freight, if reimbursable under the terms of the contract, shall be treated as a direct cost.

8.46 TRAVEL COSTS

(a) (1) Costs for transportation, lodging, meals, and incidental expenses incurred by

contractor personnel on official company business are allowable subject to the limitation contained in this subsection. Costs for transportation may be based on mileage rates, actual costs incurred, or on a combination thereof, provided the method used results in a reasonable charge. Costs for lodging, meals, and incidental expenses may be based on per diem, actual expenses, or a combination thereof, provided the method used results in a reasonable charge.

(2) Except as provided in subparagraph (a)(3) of this subsection, costs incurred for lodging, meals, and incidental expenses (as defined in the regulations cited in (a)(2)(i) through (iii) of this subparagraph) shall be considered to be reasonable and allowable only to the extent that they do not exceed on a daily basis the maximum per diem rates in effect at the time of travel as set forth in the – (i) Federal Travel Regulations, prescribed by the General Services Administration, for

travel in the conterminous 48 United States, available on a subscription basis from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, Stock No. 022-001-81003-7;

(ii) Joint Travel Regulations, Volume 2, DOD Civilian Personnel, Appendix A, prescribed by the Department of Defense, for travel in Alaska, Hawaii, the Commonwealth of Puerto Rico, and territories and possessions of the United States, available on a subscription basis from the Superintendent of Documents,

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U.S. Government Printing Office, Washington, DC 20402, Stock No. 908-010-00000-1; or

(iii) Standardized Regulations (Government Civilians, Foreign Areas), section 925, "Maximum Travel Per Diem Allowances of Foreign Areas," prescribed by the Department of State, for travel in areas not covered in (a)(2)(i) and(ii) of this paragraph, available on a subscription basis from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, Stock No. 744-088-00000-0.

(3) In special or unusual situations, actual costs in excess of the above-referenced maximum per diem rates are allowable provided that such amounts do not exceed the higher amounts authorized for Federal civilian employees as permitted in the regulations referenced in (a) (2) (i), (ii),or (iii) of this subsection. For such higher amounts to be allowable, all of the following conditions must be met: (i) One of the conditions warranting approval of the actual expense method, as

set forth in the regulations referenced in (a)(2)(i), (ii), or (iii) of this subsection, must exist.

(ii) A written justification for use of the higher amounts must be approved by an officer of the contractor's organization or designee to ensure that the authority is properly administered and controlled to prevent abuse.

(iii) If it becomes necessary to exercise the authority to use the higher actual expense method repetitively or on a continuing basis in a particular area, the contractor must obtain advance approval from the CO.

(iv) Documentation to support actual costs incurred shall be in accordance with the contractor's established practices provided that a receipt is required for each expenditure of $75.00 or more. The approved justification required by (a)(3)(ii) and, if applicable, (a)(3)(iii) of this subsection must be retained.

(4) Subparagraphs (a)(2) and (a)(3) of this subsection do not incorporate the regulations cited in (a)(2)(i), (ii), and (iii) in their entirety. Only the maximum per diem rates, the definitions of lodging, meals and incidental expenses, and the regulatory coverage dealing with specific or unusual situations are incorporated herein.

(5) An advance agreement (see Section 1) with respect to compliance with subparagraphs (a)(2) and (a)(3) of this subsection may be useful and desirable.

(6) The maximum per diem rates referenced in subparagraph (a)(2) of this subsection generally would not constitute a reasonable daily charge – (i) When no lodging costs are incurred; and/or (ii) On partial travel days (e.g., day of departure and return).

Appropriate downward adjustments from the maximum per diem rates would normally be required under these circumstances. While these adjustments need not be calculated in accordance with the Federal Travel Regulation or Joint Travel Regulations, they must result in a reasonable charge.

(7) Costs shall be allowable only if the following information is documented – (i) Date and place (city, town, or other similar designation) of the expenses; (ii) Purpose of the trip; and (iii) Name of person on trip and that person's title or relationship to the contractor.

(b) Travel costs incurred in the normal course of overall administration of the business are

allowable and shall be treated as indirect costs.

(c) Travel costs directly attributable to specific contract performance are allowable and may be charged to the contract.

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(d) Airfare costs in excess of the lowest customary standard, coach, or equivalent airfare offered during normal business hours are unallowable, except when such accommodations require circuitous routing, require travel during unreasonable hours, excessively prolong travel, result in increased cost that would offset transportation savings, are not reasonably adequate for the physical or medical needs of the traveler, or are not reasonably available to meet mission requirements. However, in order for airfare costs in excess of the above standard airfare to be allowable, the applicable condition(s) set forth in this paragraph must be documented and justified.

(e)

(1) "Cost of travel by contractor-owned, -leased, or -chartered aircraft" includes the cost of lease, charter, operation (including personnel), maintenance, depreciation, insurance, and other related costs.

(2) The costs of travel by contractor-owned, -leased, or -chartered aircraft are limited to the standard airfare described in paragraph (d) of this subsection for the flight destination unless travel by such aircraft is specifically required by contract specification, term, or condition, or a higher amount is approved by the CO. A higher amount may be agreed to when one or more of the circumstances for justifying higher than standard airfare listed in paragraph (d) of this subsection are applicable, or when an advance agreement under subparagraph (e)(3) of this subsection has been executed. In all cases, travel by contractor-owned, -leased, or -chartered aircraft must be fully documented and justified. For each contractor-owned, -leased, or -chartered aircraft used for any business purpose which is charged or allocated, directly or indirectly, to a Government contract, the contractor must maintain and make available manifest/logs for all flights on such company aircraft. As a minimum, the manifest/log shall indicate – (i) Date, time, and point of departure; (ii) Destination, date, and time of arrival; (iii) Name of each passenger and relationship to the contractor; (iv) Authorization for trip; and (v) Purpose of trip.

(3) Where an advance agreement is proposed (see Section 1), consideration may be given to the following: (i) Whether scheduled commercial airlines or other suitable, less costly, travel

facilities are available at reasonable times, with reasonable frequency, and serve the required destinations conveniently.

(ii) Whether increased flexibility in scheduling results in time savings and more effective use of personnel that would outweigh additional travel costs.

(f) Costs of contractor-owned or -leased automobiles, as used in this paragraph, include the

costs of lease, operation (including personnel), maintenance, depreciation, insurance, etc. These costs are allowable, if reasonable, to the extent that the automobiles are used for company business. That portion of the cost of company-furnished automobiles that relates to personal use by employees (including transportation to and from work) is compensation for personal services and is unallowable as stated in 8.6(m)(2).

8.47 DEFENSE OF FRAUD PROCEEDINGS

(a) Definitions.

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"Costs" include, but are not limited to, administrative and clerical expenses; the cost of legal services, whether performed by in-house or private counsel; the costs of the services of accountants, consultants, or others retained by the contractor to assist it; costs of employees, officers, and directors; and any similar costs incurred before, during and after commencement of a judicial or administrative proceeding which bear a direct relationship to the proceedings. "Fraud" means (1) acts of fraud or corruption or attempts to defraud the Government or to corrupt its agents, (2) acts which constitute a cause for debarment or suspension, and (3) acts which violate the False Claims Act, 31 U.S.C., sections 3729-3731, or the Anti-Kickback Act, 41 U.S.C., sections 51 and 54. "Penalty" does not include restitution, reimbursement, or compensatory damages. "Proceeding" includes an investigation.

(b) Costs incurred in connection with any proceeding brought by Federal, state, local or foreign Government for violation of, or a failure to comply with, law or regulation by the contractor (including its agents or employers) are unallowable if a result is – (1) In a criminal proceeding, a conviction; (2) In a civil or administrative proceeding, either a finding of contractor liability or

imposition of a monetary penalty; (3) A final decision by an appropriate official of an executive agency to:

(i) Debar or suspend the contractor, (ii) Rescind or void a contract; or (iii) Terminate a contract for default by reason of a violation or failure to comply

with a law or regulation. (4) Disposition of the matter by consent or compromise if the proceeding could have led

to any of the outcomes listed in subparagraphs (b)(1) through (3) of this subsection (but see paragraphs (c) and (d) of this subsection); or

(5) Not covered by subparagraphs (b)(1) through (4) of the subsection, but where the underlying alleged contractor misconduct was the same as that which led to a different proceeding whose costs are unallowable by reason of subparagraphs (b)(1) through (4) of this subsection.

(c) To the extent they are not otherwise unallowable, costs incurred in connection with

any proceeding under paragraph (b) of this subsection commenced by the United States that is resolved by consent or compromise pursuant to an agreement entered into between the contractor and the United states, and which are unallowable solely because of paragraph (b) of this subsection, may be allowed to the extent specifically provided in such agreement.

(d) To the extent that they are not otherwise unallowable, costs incurred in connection with any proceeding under paragraph (b) of this subsection commenced by a State, local or foreign government may be allowable when the CO determines that the costs were incurred either: (1) As a direct result of a specific term or condition of a Federal contract; or (2) As a result of compliance with specific written direction of the cognizant CO.

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(e) Costs incurred in connection with proceedings described in paragraph (b) of this subsection, but which are not made unallowable by that paragraph, may be allowable to the extent that: (1) The costs are reasonable in relation to the activities required to deal with the

proceeding and the underlying cause of action; (2) The costs are not otherwise recovered from the Federal Government or a third party,

either directly as a result of the proceeding or otherwise; and (3) The percentage of costs allowed does not exceed the percentage determined to be

appropriate considering the complexity of the procurement litigation, generally-accepted principles governing the award of legal fees in civil actions involving the United States as a party, and such other factors as may be appropriate. Such percentage shall not exceed 80%. However, if an agreement reached under paragraph (c) of this subsection has explicitly considered this 80% rule, then the full amount of costs resulting from that agreement shall be allowable.

(f) Costs not covered elsewhere in this subsection are unallowable if incurred in connection with – (1) Defense against Government claims or appeals or the prosecution of claims or

appeals against the Government. (2) Organization, reorganization, (including mergers and acquisitions) or resisting mergers

and acquisitions. (3) Defense of antitrust suits. (4) Defense of suits brought by employees or ex-employees of the contractor under

section 2 of the Major Fraud Act of 1988 where the contractor was found liable or settled.

(5) Costs of legal, accounting and consultant services and directly associated costs incurred in connection with the defense or prosecution of lawsuits or appeals between contractors arising from either (1) an agreement or contract concerning a teaming arrangement, a joint venture, or similar arrangement of shared interest, or (2) dual sourcing, co-production, or similar programs, are unallowable, except when (i) incurred as a result of compliance with specific terms and conditions of the contract or written instructions from the CO, or (ii) when agreed to in writing by the CO.

(6) Patent infringement litigation, unless otherwise provided for in the contact. (7) Representation of, or assistance to, individuals, groups, or legal entities which the

contractor is not legally bound to provide, arising from an action where the participant was convicted of violation of a law or regulation or was found liable in a civil or administrative proceeding.

(8) Protests of solicitations or contract awards, or the defense against protests of such solicitations or contract awards, unless the costs of defending against a protest are incurred pursuant to a written request from the CO.

(g) Costs which may be unallowable under 8.47, including directly associated costs, shall

be segregated and accounted for by the contractor separately. During the pendency of any proceeding covered by paragraph (b) and subparagraphs (f)(4) and (f)(7) of this subsection, the CO shall generally withhold payment of such costs. However, if in the best interests of the Government, the CO may provide for conditional payment upon provision of adequate security, or other adequate assurance, and agreement by the contractor to repay all unallowable costs, plus interest, if the costs are subsequently determined to be unallowable.

8.48 DEFFERRED RESEARCH AND DEVELOPMENT COSTS

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"Research and development" means the type of technical effort which is described in 8.18 but which is sponsored by, or required in performance of, a contract or grant. Research and development costs (including amounts capitalized that were incurred before the award of a particular contract) are unallowable except when allowable as precontract costs. In addition, when costs are incurred in excess of either the price of a contract or amount of a grant for research and development effort, such excess may not be allocated as a cost to any other Government contract.

8.49 GOODWILL

Goodwill, an unidentifiable intangible asset, originates under the purchase method of accounting for a business combination when the price paid by the acquiring company exceeds the sum of the identifiable individual assets acquired less liabilities assumed, based upon their fair values. The excess is commonly referred to as goodwill. Goodwill may arise from the acquisition of a company as a whole or a portion thereof. Any costs for amortization, expensing, write-off, or write-down of goodwill (however represented) are unallowable.

8.50 [RESERVED]

8.51 COST OF ALCOHOLIC BEVERAGES

Costs of alcoholic beverages are unallowable.


ContractingOfficer’sRepresentatives

RequirementsforContractAdministration

BPIAppendix14

Issued by the Head of the Contracting Activity Bonneville Power Administration

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1 Introduction ........................................................................................................................ 117

2 Roles and Responsibilities ................................................................................................. 117

2.1 Head of the Contracting Activity (HCA) ...................................................................... 117

2.2 Contracting Officer's (CO) Role .................................................................................. 117

2.3 Contracting Specialist (CS) Role ................................................................................ 118

2.4 Contracting Officer's Representative's (COR) Role .................................................... 118

2.5 Field Inspector's Role ................................................................................................. 119

2.6 Establishing the Contract Administration Team .......................................................... 120

2.7 Channels of Communication ...................................................................................... 120

3 Initial Contract Administration Activities ............................................................................. 121

3.1 Read the Contract ...................................................................................................... 121

3.2 Establish a COR Contract File .................................................................................... 121

3.3 Communicate with the Contractor .............................................................................. 122

3.4 Attend Post-Award Meeting with the Contractor ......................................................... 122

3.5 Review Contractor’s Performance Schedule .............................................................. 123

4 Contract Survelliance and Monitoring ................................................................................ 123

4.1 General ....................................................................................................................... 123

4.2 Document Contractor Performance ............................................................................ 124

4.3 Bonneville-Furnished Property ................................................................................... 125

4.4 Reporting Contractor’s Performance .......................................................................... 126

4.5 Financial Monitoring ................................................................................................... 126

5 Contract Modifications ....................................................................................................... 126

5.1 Contract Modifications ................................................................................................ 127

5.2 No-Cost Time Extensions ........................................................................................... 127

5.3 Bonneville Caused Delays .......................................................................................... 127

5.4 Constructive Changes ................................................................................................ 128

6 Inspection, Acceptance and Payment ............................................................................... 128

6.1 Requirements for Acceptance .................................................................................... 128

6.2 Inspection Defined ...................................................................................................... 128

6.3 Acceptance Defined ................................................................................................... 128

6.4 Responsibility for Acceptance .................................................................................... 129

6.5 Acceptance Certification ............................................................................................. 132

6.6 Processing Invoices .................................................................................................... 132

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6.7 Receiving Invoices ...................................................................................................... 133

6.8 Reviewing Invoices ..................................................................................................... 133

6.9 Forwarding Invoices ................................................................................................... 135

6.10 Recording Invoices ..................................................................................................... 135

7 Placing Delivery or Task Orders ........................................................................................ 135

7.1 Understanding Delivery or Task Order Contracts ....................................................... 135

7.2 Administering Delivery or Task Order Contracts ........................................................ 135

7.3 Preparing Requests for Delivery or Task Orders ........................................................ 135

7.4 Preparing Delivery Orders .......................................................................................... 136

7.5 Preparing Task Orders ............................................................................................... 136

7.6 Issuing Delivery or Task Orders ................................................................................. 136

7.7 CO Issues the Order ................................................................................................... 137

7.8 COR Issues the Order ................................................................................................ 137

8 Remedial Actions ............................................................................................................... 137

8.1 Initial Action When Contract Requirements Are Not Being Met.................................. 137

8.2 Contractor Agrees with COR ...................................................................................... 137

8.3 Contractor Disagrees with COR ................................................................................. 138

8.4 Addressing Failure to Comply .................................................................................... 138

8.5 Conduct in Case of an Overrun .................................................................................. 138

8.6 Disputes ...................................................................................................................... 139

8.7 Stopping Work for Health and Safety Concerns ......................................................... 139

8.8 Claims ......................................................................................................................... 140

8.9 CO Final Decisions ..................................................................................................... 140

8.10 Termination ................................................................................................................. 141

8.11 Unauthorized Commitments and Ratifications ........................................................... 141

9 Administering Interagency Agreements (IAA) and Intergovernmental Contracts (IGC) ..... 142

9.1 Interagency Agreements ............................................................................................ 142

9.2 Intergovernmental Contracts ...................................................................................... 142

9.3 COR Responsibilities Under IAA/IGC ......................................................................... 143

9.4 IAA/IGC Billing Procedures – Contracts/Agreements with Other Federal Agencies .. 143

9.5 IAA/IGC Billing Procedures - Other Than Federal Agencies ...................................... 144

10 Completion and Contract Close-Out .............................................................................. 144

11 Standards of COnduct .................................................................................................... 144

11.1 Business Ethics .......................................................................................................... 145

11.2 Conflicts of Interest ..................................................................................................... 146

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11.3 Purchasing Standards of Conduct .............................................................................. 146

11.4 BPA Harassment Policy ............................................................................................. 147

12 Do’s and Don’ts for CORs .............................................................................................. 147

12.1 Do’s ............................................................................................................................ 147

12.2 Don’ts ......................................................................................................................... 148

Exhibit 14-1 – Sample COR Delegation Memorandum ..................................................... 150

Exhibit 14-2 – Sample Field Inspector Delegation Memorandum ...................................... 152

Exhibit 14-3 – Contracting Authority and Communication Channels ................................. 154

Exhibit 14-4 Typical Contents of COR’s Contract Administration File ............................... 155

Exhibit 14-5 – COR’s Status Report .................................................................................. 157

Exhibit 14-6 – Sample of a Correction Memorandum ........................................................ 158

Exhibit 14-7 – Sample Notice for Improper Invoice ........................................................... 159

Exhibit 14-8 – Checklist for the Review of Cost Reimbursement Contract Invoices .......... 160

Exhibit 14-9 – Invoice Control Sheet ................................................................................. 161

Exhibit 14-10 - Definitions .................................................................................................. 162

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1 INTRODUCTION Bonneville has established a Contracting Officer’s Representative (COR) Program to outline a comprehensive curriculum to systematically develop skills at performing delegated contract management duties; define competency based training standards to ensure that CORs are provided with appropriate minimum and current training; and to prescribe the procedures for COR certification, appointment and cancellation of COR delegations. The purpose of this Contracting Officer’s Representative Program is to create a results oriented acquisition workforce focused on partnering, performance, quality, and accountability that ensures entrusted resources are used and managed wisely throughout all phases of the acquisition and contract life cycles.

The requirements set forth apply to all individuals delegated as the CORs. These requirements are not applicable to leases, purchase of real property, power contracts, loan guarantees or financial assistance.

2 ROLES AND RESPONSIBILITIES

2.1 HEAD OF THE CONTRACTING ACTIVITY (HCA)

The HCA is where Contracting Officer authority and ultimately Contracting Officer Representative authority derives from. As such the HCA as it relates to the COR program retains the authority to:

(a) Define the requirements for the COR Certification Program.

(b) Approve or disapprove waiver requests submitted for individuals who have not completed the required training and certification requirements.

(c) Suspend or terminate a COR delegation in situations when the COR’s job performance is deficient or when there is perceived or substantiated negligence or fraud.

2.2 CONTRACTING OFFICER'S (CO) ROLE

The CO's major post-award responsibilities include ensuring performance of all actions required for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of Bonneville in its contractual relationships.

(a) The COs role is to determine whether an individual contractual action requires an appointment of a COR.

(b) The CO is responsible to determine and prescribe additional COR training beyond the minimum requirements that is deemed necessary for the successful contract administration of an individual award.

(c) The CO is responsible to confirm the COR has the necessary skills and training for COR appointment.

(d) The CO is responsible to provide the COR a delegation letter at the time of contract award and upon any changes in delegation. The CO may terminate the delegation at any time for any reason.

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(e) If the CO deems appropriate the CO may submit a waiver request for individuals who have not completed the required training and certification requirements.

(f) Provide feedback on COR performance to the COR’s supervisor.

(g) If COR reports/performance is inadequate, discuss performance with the COR. If reports/performance continues to be inadequate, discuss COR performance with the respective COR’s direct supervisor/manager.

2.3 CONTRACTING SPECIALIST (CS) ROLE

The Contract Specialist supports the CO in administrative matters during any portion of the contract process and is distinct in the fact that a CS cannot obligate and/or make any binding decisions on behalf of Bonneville. If no Contract Specialist is designated, the CO will perform those duties.

2.4 CONTRACTING OFFICER'S REPRESENTATIVE'S (COR) ROLE

Only Federal employees may be designated as a COR. CORs perform critical acquisition, business and technical functions, and COs rely on them to ensure that contracts are managed and properly administered to meet Bonneville’s needs. COR technical and contracting skillset is critical during the contract management/administration phases of the contract life cycle. In contract administration, the focus is to obtain supplies and services on time, within budget and meeting required quality.

The COR's supervisor must allow sufficient time to ensure that the COR can adequately monitor the contract for technical compliance. The COR roles and responsibilities include, but are not limited to:

(a) Performing the duties and responsibilities assigned/delegated to him/her by the CO.

(b) Conducting diligent and rigorous contract administration and management to ensure successful project execution and completion.

(c) Being trained as a COR and knowledgeable in the practices of contract administration, limitations of their delegation and authority, and their fiduciary duties to the ratepayer.

(d) Monitoring technical performance and reporting potential or actual problems to the Contracting Officer.

(e) Communicates with the CO consistently, relaying any information that may potentially impact contractual commitments and requirements.

(f) Completing and providing information to document required training and absence of personal conflicts of interest.

(g) Notifying the CO and appropriate management if a potential or actual conflict of interest subsequently arises.

(h) Participating, as appropriate, in requirements definition/acquisition planning and contract formation processes.

(i) Establishing and maintaining individual COR files for each contract. COR files shall be made available for review by the CO, Inspector General, internal review officials or other officials as authorized by the CO.

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(j) Performs COR duties/responsibilities as designated by the CO.

(k) Reviewing and understanding terms and conditions of the contract.

(l) Providing reports on contract performance to the CO.

(m) Reviewing and annually certifying the contractor is not performing inherently governmental functions or performing personal services contracts.

(n) In monitoring the contractor performance, the COR should avoid interfering with contractor-employee relations. Further, the COR must not tell contractors to do any of the following:

(1) Hire or fire a particular employee;

(2) Reassign or discipline an employee;

(3) Grant or deny leave; and

(4) Change employee duty hours.

(o) Attending a post-award meeting as required by the CO. The purpose of the post-award meeting is to review performance schedule, requirements, performance requirements, payment and billing requirements and any special contract provisions.

2.5 FIELD INSPECTOR'S ROLE

Field inspector(s) are authorized representatives of the COR, appointed by a memorandum written by the COR with a copy to the CO. (See the sample memorandum in Exhibit 14-2.) The field inspector is typically responsible for functions such as inspection and review of the work performed under the contract, witnessing of tests, interpretation of technical specifications, reviewing invoices, and recommending approval of specific reports, materials, or services. Field inspector designations automatically terminate at the conclusion of the contract activities. COs or CORs may also terminate the designation in writing during the performance of the contract if the need for a field inspector no longer exists, or if the individual's performance is inadequate.

The list of duties for a field inspector will vary with the specific demands of the contract type (service, supply or construction), and the specific kinds of duties designated by the COR. Typically, the field inspector:

(a) Participates, as necessary, with the CO and COR, in a pre-work conference for requirements relating to area of assigned responsibility;

(b) Serves as a representative of the COR to monitor, inspect and review work performed under the contract for compliance with the technical specifications or purchase description, drawings, work schedules and labor standards of the contract (performs worker interviews and consultation, if needed, for construction); witnesses tests; recommends approval of specific reports, materials, or services;

(c) Advises the contractor promptly in writing of noncompliance with contract provisions, but makes no commitment to contractor regarding changes in price, delivery, statement of work, or other contractual terms (Note, however, that the CO may delegate field inspector(s) limited authority to make field modifications, typically for construction); reports promptly to the COR any refusal or failure by the contractor to comply with contract requirements;

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(d) Monitors and promptly reports unsafe workplace practices or conditions to contractor and COR, receives and processes contractor accident reports per established safety policy;

(e) Maintains and provides COR with timely progress reports noting contract performance status, potential and actual slippage in contract performance; recommends corrective actions to the CO, through the COR, to restore contract performance or delivery schedule; provides COR with copies of his/her official daily diaries about all actions, events, and other developments, including a photographic record of worksite conditions (as necessary) that may be a useful record in the event of a dispute or investigation; collects and reviews daily records of performance from the contractor and their subcontractor(s), as required; makes routine correspondence pertaining to administration of the contract available to the CO through the COR;

(f) Reviews payment vouchers or invoices submitted by the contractor and recommends payment based on performance and reasonableness of cost; advises the CO, through the COR, of anticipated overruns or underruns of the estimated cost under cost-reimbursement contracts;

(g) Investigates and resolves property owner complaints and non-monetary correction of damages resulting from contractor actions or inaction (typically for construction or on-site services);

(h) Assists CO and COR in coordination and arrangement for disposition of property after completion or termination of the contract;

(i) Ensures the contractor maintains current as-built drawings (typically for construction);

(j) Determines and advises COR when the work is substantially complete (typically for construction);

(k) Assists the COR with final inspection, ensures correction of punch-list items (typically for construction) and recommends final acceptance of contractor’s work and all deliverables; and

(l) Provides input to COR for evaluation of the contractor's performance for contract close-out and for use in future contracting.

2.6 ESTABLISHING THE CONTRACT ADMINISTRATION TEAM

The CO establishes the contract administration team and sets forth their duties in writing. The COR is formally designated at the time of contract award.

2.7 CHANNELS OF COMMUNICATION

The relationships between COs, CSs, CORs, field inspectors and Bonneville program or project and contractor personnel are shown in Exhibit 14-3.

Much of the COR's work is accomplished through communication with the contractor. Performance and understanding can be enhanced by clearly establishing the channels through which the communication should flow. At the outset, the COR ascertains from the contractor who will be acting as the contractor's representative on the contractor's staff for technical liaison and contract administration functions for the contract.

Even though the CO and COR are the primary representatives authorized to contractually represent Bonneville, they cannot do so without help. Effective communication with and the

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support of Bonneville program managers and support staff is imperative. The CO and COR must keep the responsible manager(s) informed of the current contract completion status, and coordinate corrective measures, as necessary.

3 INITIAL CONTRACT ADMINISTRATION ACTIVITIES

3.1 READ THE CONTRACT

The COR will receive a copy of the contract from the CO. The COR and field inspector(s) (if designated) shall read the entire contract thoroughly and become familiar with all aspects of the contract, including the administrative clauses ("boilerplate"), in order to administer the contract effectively.

3.2 ESTABLISH A COR CONTRACT FILE

The COR is required to read the contract and understand the performance and payment schedules. The COR is also required to maintain a contract file (physical or electronic) for each contract assigned. This file documents ALL actions taken in regard to the contract. It includes, as a minimum:

(a) A copy of the COR appointment letter from the CO and any correspondence from the CO which amends the letter of appointment;

(b) A copy of the executed contract and all modifications;

(c) All correspondence initiated concerning performance of the contract;

(d) All correspondence to and from the CO and the contractor;

(e) Record of all inspections performed and the results; and

(f) All memorandums for records (MFRs) or minutes of any pre-performance conferences, meetings, or discussions with the contractor, or others, pertaining to the contract or contract performance.

Below are examples of other documentation typically found in the COR contract file;

(a) Correspondence Log emails, etc.

(b) Appointment letter(s) of Field Inspector

(c) Invoices and Payment Reports

(d) Safety Reports

(e) Performance Reports

(f) Inspection Reports

(g) Closeout Reports

Since the COR is an authorized representative of the CO, the COR’s records are part of the official postaward contract files and shall be forwarded to the CO for retirement with the official contract file upon completion of the contract.

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3.3 COMMUNICATE WITH THE CONTRACTOR

Having established what the contract requires the contractor to do, the COR and field inspector(s), if designated, must learn what the contractor is planning to do. The COR should initiate contact with the contractor to establish a communication channel with the COR's counterpart.

Techniques for gathering information about the contractor's plans for performance include conducting a post-award meeting with the contractor and reviewing the contractor’s proposed performance schedule.

3.4 ATTEND POST-AWARD MEETING WITH THE CONTRACTOR

The COR shall, at a minimum, keep a log of all correspondence (i.e., conversations, telephone calls, emails) with the contractor. Any meetings held with the contractor shall have meeting minutes to document the discussion, tasks, and action items. The COR shall furnish the CO with copies of all communications between the COR and the contractor including conference reports, trip reports, telephone conversation records, memoranda for the record, meeting minutes and other correspondence.

Sample agenda items, if not resolved before award, might include:

(a) Performance schedule;

(b) Statement of work or specifications, drawings and other performance requirements;

(c) Quality management activities;

(d) Special contract provisions;

(e) Reporting requirements;

(f) Procedures for monitoring and measuring progress;

(g) General overview of clauses, changes, payments, labor laws, etc.;

(h) Billing and payment procedures;

(i) Property issuance, management policy and procedures, if applicable;

(j) Discussion of travel policy and regulations, if applicable;

(k) Distribution of appropriate posters, wage decisions, BPA policies for on-site contractors, and associated record keeping and submittals, as required;

(l) Identity of key officials and their authorities;

(m) Discussion of project hazards and contractor’s safety plan and site-specific safety plan, as applicable;

(n) Environmental requirements; and.

(o) Discussion of policy and procedures regarding non-disclosure and disposition of any Critical Information (CI) that BPA provides to or which is newly created by the Contractor.

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If a formal post-award orientation conference is not practical, telephone discussions can serve the same purpose.

3.5 REVIEW CONTRACTOR’S PERFORMANCE SCHEDULE

When the contract contains a provision that requires the contractor to submit work plans, the COR shall obtain and review them. Even if the contract does not require a formal submission, the COR should confer with the contractor to gain a thorough understanding of planned activities, and quickly address any matters that would appear to prejudice successful contract performance.

4 CONTRACT SURVELLIANCE AND MONITORING

4.1 GENERAL

The contractor and the COR both are responsible for monitoring contract work, but for different reasons. The contractor is responsible to ensure that its performance or supplies delivered comply with the terms of the contract. It is not the COR’s responsibility to do this for the contractor. As a practical matter, however, the COR typically does, to the extent and manner described in the contract, inspect and monitor the contractor’s work and quality assurance activities. The reason the COR monitors the contractor’s activities and work products are to ensure that adequate, timely progress is maintained to complete the work as per the terms of the contract. An important right of Bonneville (actually any buyer, for that matter) is the right to inspect supplies or services before acceptance, see BPI 6.1.1. The purpose of this rule is to give the CO and COR an opportunity to determine whether or not the supplies or services comply with the contract description and other contract terms.

The specific contract oversight activities of the COR are described in the contract. The extent of oversight activities, necessary will likely vary from contract to contract. The primary basis for contract oversight is the contract inspection and acceptance clause. Essentially, this clause gives Bonneville the right to inspect and test work of the contractor, and subcontractors, as called for by the contract, at any time, and any place. Bonneville will, however, perform its inspections in a manner that will not unduly delay the contractor’s work. Other, more specific, oversight requirements are found in the contract statement of work or specifications. In the case of commercial supplies and services inspection and acceptance will typically be more limited in scope and usually conducted at the place specified for delivery or performance.

In the case of a service contract where a COR is responsible for performance of contractor staff, the COR must ensure active management and oversight of the contract to ensure that services provided are not inherently governmental functions and do not evolve into a personal services type contract. This is especially important when the services being provided to Bonneville are closely associated functions with other tasks being performed by government staff. BPI Part 23 specifically subpart 23.1.5 Personal Services and 23.1.6 Inherently Governmental Functions provide specific examples and guidance for a COR to utilize when providing management and oversight of a service contract. Additionally, Part 14 provides specific reporting requirements that a COR shall accomplish annually attesting that during the management and oversight of a service contract, performance and work completed was not inherently governmental and that a personal services relationship did not exist.

The challenge for the COR in monitoring contracts of all types (supply, service or construction) is to work closely with the contractor representative to ensure that:

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(a) The contractor accomplishes the specific tasks called for in the contract;

(b) The quality of services or work products is as required by the contract;

(c) The services performed or work products developed (particularly for cost reimbursement, time and materials or a unit priced, estimated quantity type contracts) are accomplished in an efficient manner and that the contractor adequately plans and executes the contract effort to ensure that time and money are not wasted;

(d) Work hazards are identified and accident avoidance measures are appropriate; and

(e) Time schedules in the contract are met.

4.2 DOCUMENT CONTRACTOR PERFORMANCE

Since effective corrective actions cannot be taken if the magnitude of problems are unknown, the COR must be able to identify problems and determine their significance. The basic method of contract administration is contract monitoring, or surveillance of progress.

Monitoring the contractor’s progress involves the use of numerous techniques and procedures to determine whether satisfactory and timely delivery or completion will occur. Contracts are monitored to determine how contract work is being performed (in accordance with the purchase description, Statement of Work or specifications), whether it will be completed on schedule, and whether its cost (cost reimbursement or time-and-material type contracts) will fall within the contract's ceiling. The COR and other contracting personnel have a responsibility to monitor the contractor's performance to ensure compliance with contract requirements. That task depends on accurate and timely information obtained from the contractor.

Many contracts include provisions that require the contractor periodically to submit written progress reports. CORs should familiarize themselves with what these reports are required to contain and when they are due. The COR shall, as required by the contract:

(a) Get progress reports;

(b) Read progress reports;

(c) Analyze billings (See Section 6 for detailed procedures);

(d) Monitor the contractor's performance by inspection. The best way to monitor the contractor's work is through actual inspection. Standard inspection clauses may be included in Bonneville contracts to give Bonneville's authorized representatives the right to inspect and witness or conduct tests to monitor performance at all stages and wherever the work is being conducted, including the work of subcontractors. For construction work, this also includes work performed off the primary construction site. The COR must be familiar with the inspection provisions in the specific contract. The COR should make every attempt to stay ahead of actual performance and understand the contractor’s planned approach. It is particularly important that certain work be inspected as work is conducted, particularly when components of work in process are difficult or impossible to inspect at later stages of contract performance. In this way, the COR’s inspection effort is not likely to hinder the contractor’s progress.

(e) Encourage timely performance in cost-type contracts. If a contractor is late on a cost contract, there is practically no monetary adjustment in the contract price due Bonneville. For that reason, early and continuing attention by the COR is the best way to ensure timely

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delivery and cost control. Close communication with the CO is necessary before lateness becomes a problem.

(f) Document contacts with contractor. Use a contract administration file log to keep a diary of the contacts (including significant phone conversations) with the contractor. The need to maintain adequate records or logs is vital. These records provide a basis for defending against claims and are reviewable by the appropriate board of contract appeals or by the courts. (See Exhibit 14-5)

(1) Assess the competence of the contractor's performance and the initial deliverables against contractual standards of quality and efficiency:

(2) Do the contractor personnel have the competence to complete the contract in an efficient and timely manner?

(3) Are the preliminary work products or deliverables up to the standard of quality required by the contract?

(4) Are the contractor's personnel being adequately supervised by contractor's management so that they produce quality work?

4.3 BONNEVILLE-FURNISHED PROPERTY

Some contracts provide Bonneville property for the contractor to use during performance of the contract. Such provisions describe the property, timing and conditions for assignment, transfer, and use. This property may include both materials to be incorporated in the contract work, as well as, tools, facilities or equipment provided for the contractor’s use in performing the contract. It is the COR's responsibility to see that Bonneville provides the property it agreed to furnish to the contractor.

When Bonneville property is to be furnished, the COR shall take the following steps:

(a) Contact the CO for instructions. The property management representative in the Organizational Property Management Officer’s (OPMO) organization is available to the CO and COR, as necessary, for advice and assistance in administering the use of Bonneville property on the contract;

(b) Find out where the Bonneville furnished property is and make arrangements to get it to the contractor on time. When considerable material is to be provided, Bonneville may, particularly for larger construction projects, establish a material yard at or near the work site where the contractor may inspect and take possession of the property;

(c) Find out whether Bonneville property is in proper condition for use as intended. Bonneville is responsible to ensure that the property it provides is as specified in the contract and fit for its intended purpose (unless specified in the contract to be furnished in “as is” condition). The sooner this is ascertained, the sooner any necessary repairs, corrections, or other actions can be initiated and any delays in contract completion avoided. Once inspected, the contractor is responsible and financially liable for its safekeeping;

(d) Find out whether there are any special instructions or limitations regarding use of Bonneville's property. If such instructions exist, see that they are furnished to the contractor along with the property;

(e) Make sure a means exists for tracking Bonneville property, i.e., property custodian, etc.; and

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(f) Make sure, at the conclusion of the contract work, excess materials and any tools or equipment provided will be inspected, and that Bonneville will retake possession and responsibility of the property returned by the contractor. If shortages are noted, the contractor is charged in accordance with contract terms. If damaged, other than normal wear, the contractor will be liable for its repair or replacement.

4.4 REPORTING CONTRACTOR’S PERFORMANCE

After the COR has analyzed the contractor's performance as indicated in the contractor's progress reports and other available information, the COR shall promptly identify any actual or potential inadequacies and schedule changes, inform the contractor of the inadequacies, and find out how the contractor plans to remedy them. The longer problems continue without corrective action, the more serious they become and the more difficult they are to correct.

However, whether or not problems do exist on the contract, a key responsibility of the COR is to maintain communication with the CO regarding contract administration activities and to provide the CO with periodic, written performance or status reports. These reports give the CO important information about contract deliverables, contractor's technical and progress reports, contract payment and other matters. A sample of a performance status report is shown in Exhibit 14-5. This report may be adapted to specific needs in consultation with the CO.

(a) Routine Reporting: Normally when there are no significant events to warrant special reporting from COR to CO/COR, intervals of one month are sufficient between written reports.

(b) Non-routine Reporting: Whenever exceptional events occur during the course of the contract, the COR shall generate a non-routine performance status report giving the appropriate details of the specific event. For example, non-routine reports should be submitted when inadequate work is noted, when all required work has been accomplished, and when the final invoice has been received and processed. The CO may also request non-routine reports from the COR.

(c) Property Reporting: Contractors must furnish annual reports of BPA-furnished property, and property purchased with Government funds by August 31 of each year. CORs will review these reports, and indicate their receipt and acceptability on Exhibit 14-5. This will include a determination that the property is still required by the contractor.

4.5 FINANCIAL MONITORING

Financial monitoring of the contract is another way to review the contractor's progress and performance. CORs shall track actual dollars billed as each invoice is approved and forwarded for payment. (See subsection 6.2.4.) CORs can monitor the contractor's progress by reviewing actual costs expended relative to the stage of completion for specific tasks, and compare dollars expended to the original dollars estimated for those tasks. If the actual costs reveal an inconsistency, the COR shall advise the CO of possible cost overruns (cost-reimbursement or time-and-material type contracts). Financial monitoring by the COR can also assist the program manager and the CO in determining if Bonneville is receiving the best buy for the money expended.

5 CONTRACT MODIFICATIONS

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5.1 CONTRACT MODIFICATIONS

During the life of a project, it sometimes becomes necessary to incorporate changes into the contract, or to provide coverage for situations that develop after contract award. Some changes can be made in accordance with the contract, but other adjustments not expressly anticipated by the contract may also occur. In either case, where the project's objectives, the method or manner of performance, cost, or schedules are to be changed, modifications must be made to the contract.

The COR must closely monitor the contractor's activities in executing the contract's requirements. Except for a limited delegation by the CO for construction contract field modifications, the COR may not authorize additional work beyond what is specified in the contract, even if such work is within the general scope of the contract. The COR may be instrumental in the development of changes to a project or modifications to a contract, but does not have the authority to order or authorize the contractor to make such changes, technical or administrative.

If it becomes apparent that the project requires a change, the COR shall immediately notify the CO or COR. The proposed change to the contract may require convening a Strategy Panel so early notification is critical to timely and uninterrupted contract performance. Only COs operating within the scope of their authority may execute contract modifications on behalf of Bonneville. Other Bonneville personnel, including CORs, shall not:

(a) Execute contract modifications;

(b) Act in a manner to cause the contractor to believe that they have authority to bind BPA;

(c) Direct or encourage the contractor to perform work that should be the subject of a contract modification;

(d) Permit a contractor to work past the expiration of a contract; or

(e) Change the contract statement of work or specifications.

Although the need for a contract change may become apparent during reviews of the project by a COR or other program personnel, no action may legally begin on the change until a contract modification has been prepared and approved in accordance with Bonneville's normal procedures. Modifications are usually initiated by a Contract Change Request (CCR) or other form of written request, prepared by the COR or program manager. Until such time as the CCR or written request is submitted, a modification to the contract recommended by the COR will not be made.

5.2 NO-COST TIME EXTENSIONS

While the general rule is to not relinquish a contract right without receiving something in return (consideration), no-cost time extensions may be authorized by the CO under limited circumstances. If the COR encourages, or even permits, the contractor to continue work after the contract expires, a ratification action may be required. Only COs may execute no-cost time extensions.

5.3 BONNEVILLE CAUSED DELAYS

In those instances when an action or inaction by Bonneville delays the contractor, the contractor may be entitled to compensation and/or an extension of performance time. Therefore, the COR

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must play a key role in assuring that Bonneville meets its contractual commitments, and if Bonneville should be tardy, that any delays are minimized.

When Bonneville causes a delay, the COR should immediately document the reasons for delay, and send that information to the CO. In a similar manner, if the COR receives a statement from the contractor that a delay has been caused by BPA, the same information must be provided to the CO.

5.4 CONSTRUCTIVE CHANGES

Sometimes BPA actions or inactions may lead contractors to believe that a change in the contract has been ordered. The contractor is required to advise the CO immediately if such a change is contemplated. CORs must be acutely aware of the impact of their actions on the contractor's approach to performing the contract. The COR must be very careful not to encourage or direct the contractor to proceed in a manner other than that specified in the contract. Such constructive changes are often the basis for contractor claims of an equitable adjustment in the contract price and/or time. The COR is required to provide a written explanation of the circumstances surrounding the constructive change.

6 INSPECTION, ACCEPTANCE AND PAYMENT

6.1 REQUIREMENTS FOR ACCEPTANCE

The final step for the COR before payment is “acceptance.” The term acceptance means that the COR validates the supplies delivered or work performed conform to the contract.

6.2 INSPECTION DEFINED

Inspection means examining and testing supplies or services (including, when appropriate, raw materials, components, and intermediate assemblies) to determine whether they conform to contract requirements.

(a) The COR is responsible to validate that the contractor accomplished specific tasks identified in the contract.

(b) The COR is responsible to validate that the contractor provided the quality of services or work products identified in the contract.

(c) The COR is responsible to identify work hazards to ensure appropriate actions are taken to ensure overall project and personnel safety.

6.3 ACCEPTANCE DEFINED

Acceptance constitutes acknowledgment that the supplies or services conform with applicable contract quality and quantity requirements, and meet all other terms and conditions of the contract. Acceptance may take at the time of delivery, or after delivery, depending on the specific terms and conditions of the contract. Generally supplies or services shall not be accepted before the COR has confirmed all requirements outlined in the contract have been fulfilled.

Acceptance shall ordinarily be evidenced by execution of an inspection or receiving report form or commercial shipping document/packing list. The COR accepting work performed or supplies delivered on behalf of Bonneville is liable for a proper certification of its acceptance. This

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individual must have personal knowledge of the work invoiced for, and what has been completed or that the supplies received are in the quantity, quality and condition described in the contract.

While acceptance is necessary for final payment, certain types of contracts provide for interim payments, before final payment. One form of interim payment is based upon “partial acceptance,” as with partial delivery and acceptance of supplies under a supply contract or partial acceptance of quantities of unit priced items of a construction contract. Other contract types, such as construction, may permit payments in advance of final acceptance, as per the “progress payment” clause, which permits multiple progress payments during performance based on the percentage or stage of work completion. Also, cost reimbursement type contracts may require that BPA reimburse the contractor, monthly or other frequency, for costs incurred by the contractor during performance. The basis for acceptance and payment is identified in the contract. It is necessary, however, to look at more than just the payment clause. The contract must be “read and interpreted as a whole,” not just interpreted per one clause or part. Therefore, the COR needs to look at the contract payment schedule of prices and quantities; statement of work or specifications; and contract “boiler-plate” clauses, such as, the inspection and acceptance clause and the various other payment-related clauses. The COR and other members of the contract administration team need to read and be familiar with these contract terms and conditions for acceptance and payment.

Other contract clauses refer to the “date of acceptance” as the basis for action required by the clause, such as, the payment, prompt payment act, and warranty clauses. It is after final acceptance that the warranty period begins.

6.4 RESPONSIBILITY FOR ACCEPTANCE

Bonneville disbursement procedures and Treasury regulations require, to the maximum practicable extent, a separation of duties for those who are authorized to procure, accept and pay for transactions on behalf of Bonneville. This separation of duties provides internal controls to reduce risk of error, waste, and wrongful acts.

Therefore, except for established construction contract practices, CO’s are neither authorized to receive and accept supplies or work performed, nor disburse funds for the payment of purchases that they have made. Similarly, while a COR may be assigned responsibility to accept supplies or work for a purchase, this person may neither have authorized the purchase (unless authorized to issue orders pre-priced by a CO per subsection 7.4), nor authorize disbursement of funds for its payment. In a similar manner, those in Disbursement Operations must independently assess and certify the proper disbursement of funds for a purchase, but may not have ordered or received and accepted the supplies or work performed for the contract disbursement.

The COR accepting work performed or supplies delivered on behalf of Bonneville is liable for a proper certification of its acceptance. This person must have personal knowledge that the invoiced work has been completed or that the supplies received are in the quantity and quality and condition provided by the contract. If the COR does not personally have knowledge of the delivery or completion, the quality, or the quantity of the work being invoiced, the COR should not certify acceptance until consulting with another Bonneville employee who does have the knowledge required for acceptance. If the COR believes, or is on notice, that some provision has not been met, the acceptance should not be signed. Instead, refer the matter immediately to the CO. So long as the person does not falsify an acceptance certificate (for example, by accepting services not rendered or supplies not received), there is effectively no personal liability for hidden or obscure errors on the billing.

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Another important condition for acceptance is to only enforce the contract as written. The COR may not insist on conformance to what the COR personally feels is required, unless that standard is also required by the contract. Refer to the terms of the contract that describe the COR's role and responsibilities in accepting completed work.

Acceptance does not mean that the COR has audited the invoice in the financial management sense of the word. The person accepting the supplies/services is expected to use reasonable efforts and best judgment in determining if the contractor has conformed to the requirements of the contract. Reasonable verification of mathematical accuracy and review of supporting documents required by the contract are expected to be performed. If the COR is unable to determine if the work performed or supplies delivered meet the contract requirements or if the charges are appropriate, the CO and/or the BPA Audit Staff shall be contacted for advice.

6.4.1 Accepting Services

A service contract requires a contractor to furnish time and effort to perform an identifiable task. Procured service is performed through processes, either those specified in a contract purchase description or Statement of Work, and timing of delivery (performance) has to coincide with the performance period specified in the contract. The service may be for the production of an end product, such as a report, or continuous or cyclical in duration, such as office janitorial services.

The inspection of services by the COR may not, by its very nature, be possible to inspect before performance. Therefore, the measure of quality of service provided has both a tangible and an intangible component. A tangible element may be, for example, either a report produced or an office than is swept, mopped, vacuumed and dusted. The intangible components of these same service examples are, in the case of the report, the accuracy of data or soundness of conclusions. For the office cleaning service, the intangible element may be the relative degree of cleanliness. The basis for acceptance in the contract, therefore, usually describes some measure of acceptability for services rendered. The report, for example, is the final product, but the Statement of Work may provide for “milestone” meetings of the COR and contractor or interim reporting by the contractor on data gathering techniques, processes utilized, results obtained, and data produced. Similarly, the office cleaning Statement of Work may provide for the frequency of cleaning, extent, and some measure of cleanliness achieved for each task, to be inspected by the COR on each specified date of performance. Therefore, when the service is performed, the COR inspects and certifies the acceptability of service rendered for payment, against the standards of quantity, quality and basis for payment described in the contract.

Typically the COR will document acceptance of services on a contractor’s invoice submitted for payment, per the terms of the contract. If for some reason acceptance of services will not be documented on a contractor's invoice, the COR should contact the CO to determine the format and requirements of a receiving report.

6.4.2 Accepting Supplies

Supplies are tangible supplies, such as, deliverable end-items or assemblies, components, parts, raw and processed materials, and tools, but does not include real property or something intangible (incorporeal), like a patent or copyright. The means used to describe requirements for the purchase of supplies may range from commercially available descriptions, described by brand name or equivalent or general purchase description, to more detailed methods, such as, specifications of physical or chemical characteristics, material and method of manufacture or performance. Other methods of description include engineering drawing, sample, individual standards, and standard specifications.

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Every contract for supplies must have a fixed or determinable quantity of each item purchased, a basis for determining acceptability (quality), delivery terms (such as FOB destination or FOB origin (or other place of shipment) to spell out which party pays the expense of transportation and when the risk of loss passes from the seller to the buyer), price, payment terms and warranties. The requirements for contract performance are the physical delivery of the supplies, inspection for compliance with the contract description (including witnessing or conducting tests, etc.), release for shipment (when required by the contract), formal acceptance of the supplies, and payment. Various means are used by the COR and other team members to describe contract quality requirements and to inspect for compliance with the contract, as described in the contract description and “boilerplate” clause terms and conditions.

Commercial products typically will require only an inspection at the time of delivery, unless otherwise specified, verification of quantity and apparent damage, and acceptance indicating that the delivered supplies conform to the contract. To make certain of this fact the supplies must be inspected for quality. This inspection for quality is in addition to normal receiving inspection for damage during shipment. If the FOB is shipping point and the damage is found to have occurred after it left the contractor’s dock, then Bonneville is required to process the invoice for payment and contact the freight company regarding the damages to the shipment. Invoices pertaining to supplies that have been rejected should be held by the CO, pending notice of acceptance. The COR has the right to inspect the supplies for compliance with the contract description before accepting the supplies, as per the inspection and acceptance terms of the contract. If the supplies received conforms to the contract requirements, the COR or other designated person prepares a receiving report and accepts the items on behalf of Bonneville. The receiving report is either forwarded to the CO or other designated contract administration personnel for review and approval for payment, as specified in the contract. Alternately, the contract may specify that the receiving report be sent directly to Disbursement Operations. In any case, after approval, the receiving report must be forwarded to Disbursement Operations by the fifth working day after acceptance.

Supplies received that are different in quantity, quality, and price are referred to the CO for resolution. If there is a substantial deviation, or if the material is damaged, the COR or the receiving and inspection personnel will reject the supplies. A notification of rejection must be forwarded to the CO.

6.4.3 Accepting Construction

Construction is the building, alteration, or repair (including dredging, excavating, and painting) of buildings, structures or other real property. Construction does not include exploratory drilling or other investigative work for obtaining preliminary data for engineering studies and which are not part of starting or continuing a construction process. Neither does construction include the manufacture, production, furnishing, building, alteration, repair, processing, or assembling of personal property (supplies), or demolition without construction.

By its very nature, construction work is performed according to a very different set of performance criteria than services or the manufacture of supplies. Some of the performance cost elements can be measured very precisely, but others involve significant risk taking and estimation, particularly the unpredictability of the elements of nature and the elements of performance. Performance is impacted by the availability of skilled labor, tight scheduling and sequencing of work and delivery and incorporation or movement of materials in stages, leading up to the final project completion.

Acceptance of construction is typically accomplished in stages, involving separately priced items of work and quantities at prices found in the contract schedule of pricing. Therefore, partial

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acceptance is frequently made. As an example, a station of access road (100 feet), a square of roofing (100 square feet), or an hour of an electrician’s labor are a common basis for pricing and measuring discrete units of work. The contractor is paid for those units completed within the payment period. The formal acceptance of these separately priced units generally occurs upon completion, billing and payment for all work required to complete the payment item. The formal acceptance is typically made by the CO, based upon the certification of acceptance by the COR, or other representatives of the CO, as per the construction inspection and acceptance clause of the contract. (See Section 10 for construction contract close-out, and final payment.)

6.5 ACCEPTANCE CERTIFICATION

The certification of acceptance shall be made using the Bonneville Enterprise Resource Planning (ERP) system. All original invoices (except utility invoices) are to be mailed by the Contractor to Disbursement Operations, with a copy of the invoice sent to the COR. For service contracts, the CORs will certify acceptance for payment using the new ERP system. Supply contract payment is triggered by the COR or other person who receives the supplies (could be a warehouse receiving or other person) who accepts the supplies using an ERP system receiving report that is electronically transmitted to Disbursement Operations. With construction, the completed work may be billed by the contractor on an invoice or prepared using a Bonneville payment form, the original of which is sent to Disbursement Operations with a copy sent to the COR or COR for payment certification through the ERP system. The three-way match process for payment of invoices will be entirely automated by the ERP system, as will many other disbursement functions.

The Prompt Payment Act prescribes a very precise time period and process for BPA to accept supplies or work performed. Bonneville is committed by the terms of the Act and the contract to accept the supplies or work performed within five work days after receipt, unless otherwise provided in the contract. In addition, we must pay the contractor within 30 days of acceptance or receipt of a proper invoice, whichever is later, unless an improper (incorrect) invoice is specifically rejected in a timely manner. These contract requirements are generally as stated in the Prompt Payment provisions in the contract. If formal acceptance takes place beyond the indicated acceptance period, Bonneville will be liable for payment of an interest penalty payment to the contractor from the last day of the indicated acceptance period. This concept is known as constructive acceptance. Actual acceptance of supplies and services is not jeopardized by this constructive acceptance. Bonneville is not required to accept non-conforming supplies or services simply because the five working day acceptance period has elapsed.

6.6 PROCESSING INVOICES

Processing invoices is a task performed in support of payment to the contractor. The procedures for processing invoices are established by Disbursement Operations. Bonneville is required by the Prompt Payment Act to pay "proper" invoices within a specified period of time, usually 30 calendar days or less, or pay an interest penalty to the contractor. Disbursement Operations may only make a payment after it has received confirmation that the supplies or services have been satisfactorily received. Prompt processing of invoices and receiving reports by CORs is essential to avoiding interest payment charges against program office funds. Detailed information on processing requirements is contained in the disbursement guidelines in the Bonneville accounting manual or by contacting Disbursement Operations. The following information is provided for general guidance only.

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6.7 RECEIVING INVOICES

Immediately upon receipt, the office receiving the invoice must clearly stamp on the front of the first page of the invoice with the date received and the receiving organization. The stamped receiving date of the first organization or person designated in the contract to receive the invoice may be used to determine the payment due date. The Prompt Payment Act requires that the date placed on the invoice by the contractor be used to establish the payment due date when the receiving organization fails to date stamp or note when the invoice was first received, unless the acceptance date is used. It is very important that all offices note or date stamp the date of invoice receipt and the name of the receiving organization on the invoice.

Because of stringent requirements in the contract for timely acceptance of the supplies delivered or work performed, invoice review should begin immediately after the invoice is received. If invoice review must be delayed beyond the contractually permitted time, the COR is responsible for contacting the contractor and resolving whatever problem has occurred. Note on the invoice when the contractor was called and the date of resolution. This notation will protect BPA from making unnecessary interest payments.

6.8 REVIEWING INVOICES

Generally, invoices for service contracts are forwarded to the technical personnel, generally the COR, so that acceptance of the services may be recorded on the invoice itself. This has erroneously been interpreted to mean that the COR is responsible for the accuracy of each item on the invoice. That is not the intent of the COR's acceptance of the services. Instead, the COR is expected to apply only a "reasonableness" check to the invoice. The COR is not certifying that each expense was audited and justified. However, a review of the invoice and other financial data may provide information indicating reasonable progress, or lack thereof, on the project. If you have questions about the allowability of a cost item, immediately contact the CO. Only the CO has the authority to disallow cost items.

The COR should take note of the costs on the invoice and compare them to those in the contract. If Disbursement Operations finds any mathematical errors, they will make the adjustment and pay the proper amount. Verifying costs is not the same as certifying that they are correct. The COR should question the contractor concerning invoiced amounts when it appears that something unusual or unexpected is occurring. If the billing for a specific period is unexpectedly high or low, the COR should request that the contractor supply the reason(s) for the large deviation from what was anticipated.

Every invoice should receive a general review to ensure that all required data is present. If the required data is not present, the invoice is not proper and the allowable time to pay the invoice does not begin. Bonneville has only seven days to notify the contractor of the defects in the invoice; thus, prompt review is essential. A proper invoice must contain the following required data: invoice date, contract number, task order number, if applicable, contractor name and address, description and quantities of products or services, unit and extended prices, and the name, title, phone number, and complete mailing address of the responsible official to whom payment is to be sent. The dates of performance for services should be shown to ensure that multiple payments are not made for the same services. If this essential data is not present, contact the contractor to point out the inadequacies and document that contact on the invoice. Alternately, a Notice for Improper Invoices can be prepared (See Exhibit 14-7). Forward a copy of the notice along with a copy of the rejected invoice to Disbursement Operations.

In the event the COR does not understand the invoice or the invoice appears to be in error or in other ways inadequate to support the payment, the COR should attempt to resolve the problem with the contractor. Discussions with the CO will be helpful in resolving problems. If the COR is

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unable to resolve the problem with the contractor, the invoice shall be forwarded to the CO with an explanation of why the invoice may not be certified and paid. The CO will then contact the contractor to attempt to resolve the problem.

Following this general review, and before proceeding to the steps described below, the COR shall enter the proper accounting data on the invoice: organization, activity code, PL-6, and object class if known. If the COR knows that this is the final invoice to be submitted under the contract, that fact should be noted under the COR's signature, and a COR performance status report (see Exhibit 14-5) should be submitted.

6.8.1 Reviewing Fixed-Price Contract Invoices

Invoices submitted under fixed-price contracts receive only a brief review by the COR to ensure that required data is present and that amounts invoiced conform to the contract prices and payment provisions in the schedule of items.

6.8.2 Reviewing Cost-Reimbursement Contract Invoices

Provisions of cost-reimbursement contracts obligate BPA to pay the contractor the allowable, reasonable, and allocable costs of performing the contract (plus, in some cases, a fee or profit).

Because the technical expertise of the COR is essential to understanding the necessity for direct costs on the project, the COR should review the reasonableness, allowability, and allocability of costs claimed for reimbursement. The COR should also assure that the contractor submits adequate documentation of costs as required in the contract. Contact the CO if you are unsure how much documentation is needed.

"Allowable" costs are those permitted by the standards set forth in BPI Part 13 (See Appendix 13-A). Special provisions in the contract may also affect the allowability of specific costs.

Whether it is "reasonable" to incur specific costs for performing a particular type of work is a question that can best be answered by an individual familiar with what is involved in performing that type of work, and who has the technical qualifications to make an informed judgment. The materials or effort may be "unreasonable" in that they exceed or differ from what is necessary to complete the contract work. Detecting unreasonable direct costs is the responsibility of the COR. If unreasonable costs are noted, contact the CO for advice.

A cost is properly "allocable" to a contract if it is incurred specifically for the contract or is incurred by the contractor for other activities that also benefit the contract. The COR's actions with regard to the allocability of costs claimed will be to spot direct costs that appear to have no connection with the contract work. If the reason for billing materials or specific labor hours to perform the contract is not clear, it may be that the costs were charged to the contract in error.

Many contracts require the contractor to submit periodic financial reports showing the total costs incurred during the last reporting period, cumulative total, etc. To be useful, such reports should "key in" with a financial expenditure plan or budget for the entire contract, so actual costs can be compared with planned costs, shortfalls in estimates can be identified, and timely management decisions regarding additional funding can be made and implemented

The checklist in Exhibit 14-8 may be used as a guide when reviewing invoices for cost-reimbursement contracts. If used such a checklist is used, it should be filed in the COR's contract administration file. When the unexpended balance declines below the amount needed to complete the work, the COR must discuss with the CO the future of the contract and the project.

6.8.3 Reviewing Time-and-Material Contract Invoices

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Review of time-and-material contract invoices is substantially the same as for cost-reimbursement contracts except that only the number of hours billed need be reviewed for reasonableness and compared to the progress on the project. It is important to review the composition of the hours billed if the contract has different labor rates associated with the different competence and skill levels, i.e., partner hours, senior manager, staff accountant, or senior technical engineer versus engineer/draftsman. Some firms have an internal practice of charging a pro rata portion of "senior" hours for a given number of junior hours and attempt to justify it on the basis of "standard" managerial review and oversight experience within their firm. If the COR has reason to believe that the invoice includes such estimated amounts, the COR should question the contractor concerning these costs. Direct costs, i.e., the material portion of the invoice including travel costs, are reviewed in the same manner as cost reimbursement contracts (See Exhibit 14-8).

6.9 FORWARDING INVOICES

Immediately following review of the invoices, original invoices containing the acceptance of services statement will be forwarded to Disbursement Operations. The COR should retain a copy of the invoice in the COR file and forward a copy to the CO, attached to the status report.

6.10 RECORDING INVOICES

The COR may be required to enter and approve invoices in Bonneville’s electronic Business Enterprise System (BES), particularly for services contracts. If the BES application is not used, the Contract Invoice Control Sheet as shown in Exhibit 14-9 or similar spreadsheet is useful for logging each invoice processed. Special attention should be paid to the column headed "Remaining Funds." CORs should compare this total after processing the invoice to ensure that sufficient funds remain to permit completion of the contract work.

7 PLACING DELIVERY OR TASK ORDERS

7.1 UNDERSTANDING DELIVERY OR TASK ORDER CONTRACTS

Bonneville often knows that it will have requirements for specific supplies or services, but does not know exactly how much it will need or when it will need them. Delivery orders (supplies) or task orders (services or construction) give Bonneville flexibility in meeting its needs. The COR should review BPI Part 7 for specifics regarding each type of contract or agreement.

In administering any ordering arrangement, the COR must be aware of the clauses in the contract or agreement specifying who may place orders and how the orders are to be placed. The COR should work closely with the CO to establish procedures for the ordering process.

7.2 ADMINISTERING DELIVERY OR TASK ORDER CONTRACTS

The COR's duties in administering ordering contracts are the same as in administering other types of contracts: To assure that the contractor adheres to the purchase description, performance periods, and completion of deliverables as stated in the task order.

7.3 PREPARING REQUESTS FOR DELIVERY OR TASK ORDERS

A delivery or task order is prepared in the manner and in the level of detail as required by the Indefinite-Delivery/Quantity contract or Blanket Purchase Agreement upon which the order is based. See BPI 7.2.5 for more details.

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7.4 PREPARING DELIVERY ORDERS

A delivery order will contain all of the information required to describe the terms of the order: Line item description for each item, quantity, unit of issue, and unit and extended prices, FOB point, delivery location, delivery period, accounting information, and COR designation or other person or organization for inspection and acceptance. The terms and conditions for administering the order are those contained in the Indefinite-Delivery/Quantity contract or Blanket Purchase Agreement.

The purchase description or specification required for a delivery order is often contained in the Indefinite-Delivery/Quantity contract or Blanket Purchase Agreement, and referenced in the delivery order. However, the Indefinite-Delivery/Quantity contract or Blanket Purchase Agreement may provide for a separate purchase description or specification, to be attached to each order.

7.5 PREPARING TASK ORDERS

The task order will contain, similar to the delivery order, the necessary description of the work, whether for service or construction. For services, the work typically will be described using either a purchase description, particularly for commercial services, or a Statement of Work. Construction work may, similarly be described either using a purchase description for construction or using a specification, with drawings as necessary. The task order purchase description, Statement of Work or specification should be clear and precise. The task order document communicates to the contractor the specific tasks to be performed. A vague, unclear, or unnecessarily broad work description may prevent the contractor from accomplishing the exact task desired. Ways to help assure that task order wording is clear and precise include:

(a) Review of the draft task order by other BPA project personnel acquainted with the program involved. Ambiguities and other inadequacies can often be spotted by a knowledgeable person who has had no involvement with writing the draft task order.

(b) Review of the draft task order by the contractor to assure mutual understanding can uncover matters that are not clearly expressed. However, the contractor must not be asked or permitted to draft task orders.

Work described in the task order must fall within the "scope" of the contract. Task orders must describe particular work that falls within the general description of services or construction that the contractor has agreed to perform. If Bonneville wants work done that is not covered by the task order contract, then the purchase of such work should be handled as a new contract action. If in doubt, the COR/program office should contact the CO/CS.

Work described in the task order should be achievable within the dollar and time limitations of the contract. BPA practice treats the contract completion date of a contract as the end of the contractor's obligations unless the contract or task order specifies that task orders issued prior to the contract completion date may continue until completion of the task regardless of the contract completion date. However, this must be clearly stated in the contract or task order.

7.6 ISSUING DELIVERY OR TASK ORDERS

The majority of delivery or task order contracts require that orders be authorized and issued by the CO. However, CORs may be authorized by the CO to issue task orders up to a specified amount under certain limited circumstances, such as when the pricing is fixed per the terms of the master contract or agreement. In such cases, the contract will specifically state the limits of the COR to issue orders.

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7.7 CO ISSUES THE ORDER

While the CO normally issues the order to the contractor, the COR is generally responsible for preparing and submitting the technical description of the work to be performed or supplies delivered (purchase description, SOW or specification) and a purchase request. The CO conducts necessary negotiations and or clarifications needed and issues the order. CORs may be asked to conduct some of the discussions with the contractor but are not authorized to direct the contractor to proceed with the work until the order document is signed by the CO.

7.8 COR ISSUES THE ORDER

In those instances when the COR has been delegated authority in the contract to issue orders without CO review or approval, the following steps shall be taken:

(a) COR will obtain funding approval for the order. This approval may require a PR if the COR is using funds from a different organization.

(b) Any required clarifications will be conducted by the COR. Once agreement has been reached with the contractor, the COR will prepare and sign the task or delivery order and distribute copies as directed by the CO. The task order will be documented as defined in BPI Part 12.

(c) The COR will distribute the order to all parties. Forward a copy of the order to Disbursement

Operations. Send a copy of the order and the PR, if one is created, to the CO, and send the order to the contractor who is to perform the work.

8 REMEDIAL ACTIONS

8.1 INITIAL ACTION WHEN CONTRACT REQUIREMENTS ARE NOT BEING MET

Once the existence and cause of a technical discrepancy or performance delay are identified and it is determined that the contractor is not complying with a specific requirement called for in the contract, the COR should make sure that the CO and project management are informed of the circumstances in a timely manner so that alternatives for dealing with the problem may be adequately assessed. The COR should also immediately call the contractor's attention to the discrepancy and seek the contractor's voluntary commitment to remedy the failure. If the contractor agrees that the problem exists and will remedy it, the COR should document the discussion in a letter to the contractor with a copy to the CO. After the contractor has had an opportunity to remedy the problem, the COR should follow up to see if remedial action was taken. Results of the follow-up should be documented.

The COR may not direct the contractor on a course of action to fix the problem. It is up to the contractor to choose whatever course of action is appropriate to remedy the problem unless Bonneville must direct specific actions to protect its own interest. If the latter is necessary, the CO must be advised. CORs may not order corrective action.

The COR's task is to avoid surprises caused by improper or delayed performance after it is too late to cure it. Timely action by the COR affords program management and the CO the chance to make decisions based on the maximum number of options. It also minimizes adverse program impact of delay by providing an opportunity to revise planning at an early stage.

8.2 CONTRACTOR AGREES WITH COR

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When the contractor agrees that the contract requirements are not being met, there are several possible courses of action available to the contractor. If the contract is fixed-price, the risk is on the contractor to remedy the problem at its own expense, unless a remedy-granting provision provides otherwise. If the contract is cost-reimbursement and the contract clearly defines standards for acceptance, the contractor must pay the costs of rework. However, in cost reimbursement contracts without such standards, Bonneville must pay all reasonable, allowable, and allocable costs to remedy the problem. Bonneville, therefore, has a major role in deciding how to address the problem. For example, the work might be speeded up by using more people or overtime, but the availability of more qualified personnel and/or the availability of program funds for more workers or overtime need to be explored and decided on by the CO based on the recommendation of the program office.

8.3 CONTRACTOR DISAGREES WITH COR

The contractor may disagree that contract requirements are not being met. The COR should then discuss the matter with the contractor to discover the basis for the contractor's position. If the COR still feels that the contractor's position has no reasonable basis, the COR should advise the contractor of the need to take corrective or other action necessary to meet the requirements of the contract. Such advice needs to be confirmed in writing with a copy to the CO. (Written notice is important to document Bonneville's case if an adverse action, such as suspension of work or termination, is later required.) The giving of such advice is part of the COR's primary task of ensuring that the contractor does what was promised in the contract. By the same token, the COR must not direct the contractor to do more than or different from what the contract specifies. Such a direction would exceed the COR's authority.

If on the other hand the COR considers that there is or may be reasonable basis for the contractor's position, the COR should discuss the matter with the CO to see what course of action should be taken to resolve whether the contractor is complying with the contract or not.

8.4 ADDRESSING FAILURE TO COMPLY

If the contractor fails to comply with a contract requirement within a reasonable time after the deficiency has been identified, the COR should report all facts to the CO in writing. The report should contain a recommendation to the CO to take appropriate action. A letter may be sent to the contractor pointing out the failure of performance and its importance to Bonneville and requesting the contractor to meet with the CO to discuss the situation and the contractor's plans for remedying it. Such a letter can be beneficial in assuring that top management in the contractor's organization is aware of the problem and in enlisting its support for corrective action. However, if the departure from contract requirements is so serious that further performance would be a waste of money and if it appears that the contractor will not or cannot remedy its failure, the COR should recommend that the CO terminate the contract pursuant to the appropriate contract clause.

8.5 CONDUCT IN CASE OF AN OVERRUN

When the contractor's incurred costs reach the stated estimated costs and the obligation to proceed is suspended, the contractor is obligated to notify Bonneville. It is important that Bonneville program personnel not request or encourage the contractor to continue work unless directed to do so by the CO. Boards of Contract Appeals have held that such action will legally obligate Bonneville to reimburse the contractor for continuing with the work. This action exceeds the COR's authority and will lead to increased BPA expenditures.

On the other hand, fairness requires that Bonneville not keep the contractor in suspense. The COR should facilitate a prompt determination of whether or not BPA will fund and authorize

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continuation of performance. When the decision is made, based on program office advice as to whether additional funds will be provided, the CO is responsible for informing the contractor. If funds are provided, such increase in funds can only be added to the contract by a contract modification signed by the CO (See Section 5).

8.6 DISPUTES

In the course of performing Bonneville contracts, disputes may arise between Bonneville and the contractor over rights and obligations under the contract. Typical disputes concern such questions as: which interpretation--Bonneville's or the contractor's--should be attached to ambiguous contract language; what constitutes an "equitable" adjustment for a particular contract change--the amount allowed by the CO or a larger amount claimed by the contractor; or how much delay was caused the contractor by Bonneville action/inaction or other valid reasons and is, therefore, "excusable"? As Bonneville’s primary liaison with the contractor, the COR may be the first person aware of differences of opinion between Bonneville and the contractor.

When the COR discovers a difference of opinion regarding the rights or obligations of either party under the contract, the COR should promptly initiate discussions with the contractor to find the basis for the contractor's position. The aim should be to resolve the disagreement by arriving at a mutual agreement. The COR should also let the CO know about the disagreement, including the positions of the COR and the contractor, and, if it appears that the COR can resolve the matter with the contractor, the COR should review the proposed solution with the CO. These actions should be completely documented in writing to the CO.

The contract's Disputes clause empowers the CO to issue a decision on the matter if the contractor and the CO cannot arrive at agreement on what the contract requires. The clause directs the contractor to proceed with performance of the contract in accordance with the CO's decision.

8.7 STOPPING WORK FOR HEALTH AND SAFETY CONCERNS

Initial Notice: If the Contractor fails or refuses to immediately comply with any safety or health requirement, any Bonneville employee may notify the Contractor of any safety and health concerns. The notice may be in writing or oral. The notice may be delivered to any contractor employee or a subcontractor. The notice shall have the same effect on the contractor regardless of format or recipient. The Contractor shall take immediate action to mitigate the safety and health concerns identified in Bonneville’s notice. Bonneville employees have authority to immediately Stop a Work Activity without issuing an initial notice.

Stopping a Work Activity: Bonneville employees may direct the contractor to stop a work activity due to safety and health concerns. The Bonneville employee shall notify the Contractor orally with written confirmation, and request immediate initiation of corrective action. After receipt of the notice the Contractor shall immediately take corrective action to eliminate or mitigate the safety and health concern. When a Bonneville employee stops a work activity due to a safety and health concern the Contractor shall immediately notify the CO, provide a description of the event, and identify the Bonneville employee that halted the work activity. The Contractor shall not resume the stopped work activity until authorization to resume work is issued by a Bonneville Safety Official.

Stop Work Order: The Contracting Officer may direct the contractor to Stop Work due to safety and health concerns in addition to reasons described in Clause 14-14 Stop Work Order. The CO’s Stop Work Order may cover all work on the contract or only a portion of the work. After the CO issues a Stop Work Order for a safety and health concern the Contractor shall meet with

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representatives of Bonneville’s Contracting Office and the Bonneville Safety Office to present a written statement outlining specific changes the contractor will make to the work procedures to improve safety. A Stop Work Order issued for safety and health concerns will not be rescinded without approval by the CO and the Bonneville Safety Office.

8.8 CLAIMS

A claim is a written demand by one of the contracting parties seeking the payment of money, adjustment of contract terms, or other relief arising under the contract.

Some typical reasons for claims from the contractor include:

(a) A change in BPA's requirements during the conduct of the contract;

(b) The contractor encountered conditions different from those BPA led the contractor to expect;

(c) BPA redirected the contractor's efforts after the contract was underway; or

(d) BPA delayed the contractor.

(e) Occasionally BPA may also feel that it has a claim against the contractor. Typical reasons for such claims include:

(1) The contractor is late in delivering the required services and BPA incurs damages because of the late delivery; or

(2) The contractor adversely impacts other BPA contractors or operations.

The most important functions of a COR in a claim situation are to immediately notify the CO and to investigate the circumstances surrounding the claim. The COR should promptly investigate the basis for the claim and send a written report to the CO. The COR is not authorized to issue decisions on claims, but may discuss with the contractor the basis for the claim if so directed by the CO. The CO may also ask the COR to begin the negotiation process in an attempt to settle the claim. However, the COR must not give the impression to the contractor that the claim is being settled or that the COR has authority to do so.

8.9 CO FINAL DECISIONS

When a contractor files a contract claim against Bonneville, the CO must determine its merit and negotiate a contract adjustment or issue a final decision on that claim. Generally, the claim filed by the contractor will have been discussed with the COR and perhaps the CO prior to a written assertion of the claim by the contractor. During these discussions, it will become obvious whether Bonneville agrees or disagrees with the contractor's claim.

If Bonneville agrees that the contractor's claim is valid, the CO will, following negotiations, prepare a contract modification to make the necessary adjustment in the contract price or other terms/conditions. Most claims are adjusted through contract time extensions or payments of money.

However, if the CO and the contractor disagree on merit or adjustment and a claim is filed, the CO must issue a formal, final decision in writing. This final decision will address all elements of the contractor's written claim based on written information provided by COR and other affected parties.

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8.10 TERMINATION

The object of termination is to cut off further expenditure of Bonneville funds for continued effort by the contractor. There are four types of termination actions that may be included in Bonneville contracts.

Termination for default is used when the contractor has failed to fulfill a significant requirement of the contract. As a rule, Bonneville cannot recoup amounts already expended for deficient performance, but it may recover excess costs of obtaining the same or similar services from another source in cases of termination prior to the contract delivery/completion date under firm fixed-price contracts.

In potential default termination situations, a key responsibility of the COR is to give timely notice to both the contractor and CO when the contractor is in noncompliance. The contractor must take whatever actions it determines necessary to assure compliance. However, if the COR knows of noncompliance, the COR must advise the contractor rather than waiting until the noncompliance requires a default termination action. The COR may not terminate a contract.

In the event of default termination action, the contractor has the right of appeal. Documentation obtained by the COR will be extremely important for use if the contractor appeals the CO's actions.

Under cost-reimbursement contracts, even where a right to terminate for default is included in the contract and may properly be exercised, the contractor is normally entitled to reimbursement for expenses incurred up to the time of termination, unless the work performed does not conform to the standards of acceptance stated in the contract. Bonneville applies the same rule to time and materials contracts.

Termination for the convenience of Bonneville is normally used when Bonneville's requirements have changed to such an extent that continuation of the contract is not in Bonneville’s interest; however, the contractor's performance has not breached the contract. When the right to terminate for the convenience of Bonneville is exercised, the contractor is entitled to compensation for work done prior to the termination.

In some contracts both Bonneville and the contractor have a mutual right of termination. In such contracts the parties may negotiate the end of performance. Termination by mutual consent is used when the work under the contract is not progressing satisfactorily, and both parties want to stop the work. Normally, no payment by either party will be made to the other to compensate for the termination.

Termination for the convenience of either party gives to the contractor the same right to terminate at any time that Bonneville has traditionally reserved for itself. This type of termination is included in a contract only when deemed necessary by the CO to establish a viable business agreement and is advantageous to Bonneville. This type of termination is normally not used for firm fixed-price contracts. For cost or time and materials type contracts, the contractor exercising this right will be paid for work completed as of the date of termination.

The COR plays a key role in potential or actual termination actions. The COR is responsible for documenting circumstances that may lead to the need to terminate the contract. In a situation that could lead to a termination action, it is the responsibility of the COR to advise the CO in a timely manner so that necessary negotiations are not delayed.

8.11 UNAUTHORIZED COMMITMENTS AND RATIFICATIONS

There are times when an unauthorized commitment is made by someone that lacked the authority to enter an agreement on behalf of Bonneville. When this happens it is called an

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unauthorized commitment. The unauthorized commitment is not binding. The CO will determine what steps are appropriate, which could include ratification. Ratification is the act of approving an unauthorized commitment by an official who has the authority to do so. An unauthorized commitment places Bonneville in a position of risk, unnecessary time and expense and negatively impacts contractor relationships. However effective communication with the CO and contractor will generally prevent an unauthorized commitment. The COR is instrumental in protecting the agency by ensuring discussion of changes or perceived changes are directed to the CO for review and action.

9 ADMINISTERING INTERAGENCY AGREEMENTS (IAA) AND INTERGOVERNMENTAL CONTRACTS (IGC)

9.1 INTERAGENCY AGREEMENTS

Interagency Agreements (IAA) are a streamlined mechanism in Bonneville can conduct business with other government entities including Federal, State, Local, and Federally Recognized Tribal Governments. These government entities are accountable to the public and are subject to similar statutes which sometimes contain more restrictive regulations than Bonneville. When conducting business with other government entities, an IAA is the preferred method to acquire goods and services. An IAA provides a statement of work and payment mechanism without negotiating terms and conditions as usually performed in a commercial type contract.

IAA Usage:

(a) Bonneville may enter into IAAs based on the authority of the Bonneville Project Act (16 U.S.C. § 832.). Other Federal entities enter into IAAs based on the authority of the Economy Act (31 U.S.C. § 1535). Under the Bonneville Project Act, Bonneville may conduct business with other government entities through the use of an IAA. An IAA would be appropriate in the following situations:

(1) A statute, executive order, court order or law expressly authorizes or requires that an acquisition be made through another government agency.

(2) A government entity needs supplies or services and obtains them using another department and/or agency’s contract.

(b) The CO shall document that using an IAA represents the best procurement approach to meet the business need. At a minimum, the CO should cite;

(1) The statute, executive order, court order or law that expressly authorizes or requires that an acquisition be made through another government agency; or

(2) Explain why the use of an interagency acquisition is in the best interest of Bonneville.

9.2 INTERGOVERNMENTAL CONTRACTS

Intergovernmental contracts (IGCs) are legally the same as the contracts discussed in other parts of this Guide, but they are with entities such as other federal or state agencies, Indian Tribes, etc. An intergovernmental contract binds both parties to perform: The contractor-agency provides a service, and Bonneville reimburses the costs. The intergovernmental contracts are

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as legally binding and enforceable as are contracts with commercial enterprises. Some characteristics of intergovernmental contracts include:

(a) There are generally fewer terms and conditions (less boilerplate) in an IGC;

(b) The transaction is with a governmental body at the Federal, State, or local governmental level, a publicly owned college or university, or an Indian Tribe;

(c) Intergovernmental contracts are usually of the cost-reimbursement type. This means that the risks and costs are borne primarily by BPA, and that the governmental body will recover essentially all of its costs. Cost reimbursement intergovernmental contracts have specific cost principles, listed in BPI Part 13, and cited in the contract. The contractor agency may bill BPA only for costs that are reasonable, allowable and allocable under the intergovernmental contract; and

(d) Termination provisions are usually mutual, and do not contain the remedies for failure to perform found in most contracts with the commercial sector.

9.3 COR RESPONSIBILITIES UNDER IAA/IGC

COR attention to performance under an intergovernmental agreement and/or contract is just as critical as with the other contracts described. Close monitoring is essential to ensure that the project is conducted in an efficient and businesslike manner. Basic steps and actions outlined in other parts of apply generally to IGCs. Although the terms and conditions of intergovernmental contracts are less stringent than contracts with the private sector, the need for project accomplishment in a timely, efficient manner is just as critical to Bonneville.

9.4 IAA/IGC BILLING PROCEDURES – CONTRACTS/AGREEMENTS WITH OTHER FEDERAL AGENCIES

Payments on the majority of contracts entered into with other Federal agencies are disbursed using the U. S. Treasury's On-Line Payment and Collection (OPAC) system. Under these systems, payments are initiated by the contractor agency. Bonneville receives a computer-generated billing statement through the Government-on-Line Agency Link System (GOALS). Funds are automatically transferred between the contractor agency's and Bonneville's account with the U. S. Treasury upon Treasury's receipt of the billing. This is generally accomplished before Bonneville can perform the acceptance and invoice review processes described in Section 6.

Even though funds have already been disbursed to the contractor agency, Bonneville has an opportunity to review and, if necessary, to correct the billing, generating a credit or charge back entry to the account of the contracting agency.

Disbursement Operations sends the hard-copy billing to the COR for receipt and acceptance. This hard-copy billing, which should include all necessary supporting documentation, needs to be reviewed and accepted or rejected with an accompanying explanation and returned to Disbursement Operations promptly so that credits can be claimed in the time allowed and so that the charges can be input into BPA's financial information reporting system.

Acceptance of supplies or services provided by Federal agencies under IGCs is performed in the same manner described in subsection 6.1.

Review of the billings by the COR is performed in the same manner as the review of commercial invoices. In the event problems are discovered during this review, the CO should immediately

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be contacted and advised of the problem. The problem should then be documented in a memorandum to the CO

9.5 IAA/IGC BILLING PROCEDURES - OTHER THAN FEDERAL AGENCIES

Generally, billings submitted by Governmental organizations other than Federal agencies are received and reviewed for reasonableness in essentially the same way as those submitted by commercial organizations. COR responsibilities and procedures for acceptance of services and invoice review are the same as those described in Section 6.

10 COMPLETION AND CONTRACT CLOSE-OUT The COR determines when the work has been completed in accordance with the technical requirements of the contract, including any contract extensions or renewals. This is done by inspecting all deliverables promptly upon receipt to determine acceptability. Administrative matters such as the disposition of Bonneville furnished property should be attended to as soon after physical completion of the contract as possible. When all items required by the contract have been delivered and accepted, the COR notifies the CO by submitting a COR performance status report. (See Exhibit 14-5.) Contract close-out is triggered by this notification.

Prompt initiation of contract/intergovernmental contract close-out allows the COR to obtain firsthand information from other individuals who were personally involved with the contract/intergovernmental contract. Resolution of open matters is more difficult when personnel have moved to other jobs and their recollections become vague.

The COR may have additional responsibilities concerning formal certification of completion and acceptance (such as obtaining or confirming delivery of Bonneville-furnished property certificates, supply test reports, final drawings, instruction books, and any other final deliverables, as specified in the contract), and other issues related to formally closing the contract. The COR need not initiate these additional documents; they will be requested from the COR by the CO when required.

For construction work, additional steps of final inspection, obtaining a release of contractor’s claims, and settlement of claims are typically performed as a part of the close-out process. The COR or field inspector determines when the work has been substantially completed in accordance with technical requirements of the contract and conducts a final inspection, developing a “punch list” of those remaining contract items to be resolved. Besides the punch-list items, the COR or field inspector addresses all remaining administrative matters related to close-out, such as receipt of all special warranty documentation, Operation and Maintenance Manuals, spare parts and disposition of Bonneville-furnished property. When all items required by the contract have been completed, the notice of final inspection is sent to the CO with a copy to the COR, if performed by the field inspector. On larger contracts, and some smaller as well, the contractor is typically required to submit a release of claims prior to BPA making final payment. Unless specifically listed on the release form, the contractor may not submit any further claims under the contract. Once a release of claims is received, any remaining payment is processed, even if some claims are still pending resolution, such as those previously submitted or noted as a condition of the contract release of claims.

11 STANDARDS OF CONDUCT

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11.1 BUSINESS ETHICS

Bonneville business must be conducted in a manner that is above reproach, with complete impartiality and preferential treatment for no one. Although Federal laws and regulations restrict the actions of Government personnel, their official conduct must be such that they would have no reluctance making full public disclosure of their actions. It is important that BPA personnel observe proper standards of conduct in the discharge of their official duties, especially those duties involved in purchasing programs.

All Bonneville employees must clearly understand the standards of conduct for power and transmission operations. BPA adopted the Standards of Conduct of the Federal Energy Regulatory Commission (FERC) Order No. 889, separating its wholesale power marketing function from its transmission system operation and reliability functions, and to conducting its future operations per the order.

The basic rules are that--

(a) Access to information on Bonneville’s transmission availability, price, uses or potential uses cannot be discussed with Bonneville’s power marketing employees;

(b) No BPA transmission operations and reliability employees can take part in Bonneville power marketing functions, such as buying and selling power;

(c) BPA employees who provide services shared by both Bonneville transmission operations and reliability operations and Bonneville power marketing operations, and who have access to information on transmission price and availability, cannot discuss such information with Bonneville power marketing employees; and

(d) BPA power marketing employees can only have access to Bonneville transmission availability, price, uses or potential uses only through an Internet site: the Open-Access Same-time Information System (OASIS).

It is Bonneville policy not to interfere in the private lives of its employees; however, certain other standards of conduct are required. These are published in detail and available to all personnel (see Standards of Ethical Conduct for Employees of the Executive Branch, 5 C.F.R. Part 2635, BPI Part 3 and Appendix 3- A). Adherence to these standards requires that employees not do indirectly what would be improper to do directly.

Because of their importance in purchasing activities, Bonneville personnel should be familiar with the following selected standards:

(a) No employee shall receive any salary or compensation for services as a Federal employee from any source other than the Government of the United States, except as may be contributed out of the treasury of a State, county, or municipality.

(b) Employees shall not engage in any outside employment or other outside activity in conflict with the full and proper discharge of the duties and responsibilities of their Bonneville employment.

(c) Acceptance of gifts, entertainment, or favors (no matter how innocently tendered and received) from those who have or seek business with Bonneville, may be a source of embarrassment to Bonneville and to the employee involved. It may affect the objective judgment of the recipient and impair public confidence in the integrity of the business relations between Bonneville and industry. Therefore, Bonneville employees shall not

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knowingly solicit or accept any gifts, entertainment, or favors, either directly or indirectly, from any interested party. (Complimentary meals and beverages or other de minimus gifts may be accepted under certain conditions, see 5 C.F.R. Part 2635.) For the purpose of this standard, gifts, entertainment, and favors include any benefits, gratuities, loans, discounts, tickets, passes, transportation, accommodations, or hospitality given or extended to or on behalf of the recipient.

(d) An employee shall not directly or indirectly use or allow the use of Bonneville property of any kind for other than officially approved activities. An employee has a duty to protect and conserve public property, including equipment, supplies, and other property entrusted or issued to the employee.

(e) Bonneville employees must not directly or indirectly use official information for private gain which has been obtained through the employee's Bonneville employment if the information has not been made available to the general public.

(f) Employees are prohibited from endorsing the proprietary products or processes of manufacturers or the services of commercial firms for advertising, publicity, or sales purposes. Use of material, products, or services by Bonneville does not constitute official endorsement.

Public confidence in BPA employees clearly demands that each employee take no action that would constitute the use of official position to advance personal or private interests.

11.2 CONFLICTS OF INTEREST

Technical and contracting personnel must observe standards of conduct and avoid conflicts of interest with suppliers or potential suppliers of Bonneville to obviate any possible inference that Bonneville may be compromised by an employee's actions.

A few key points relating to conflicts of interest in purchasing matters are:

(a) Employees, or their families, shall not have a direct or indirect financial interest that conflicts substantially, or appears to conflict substantially, with the employee's Bonneville duties and responsibilities.

(b) Employees, or their families, shall not engage, directly or indirectly, in a financial transaction as a result of, or primarily relying on, information obtained through Bonneville employment which has not been made available to the general public.

(c) Unless authorized to do so, no employee shall participate as a BPA employee in any matter that the employee knowingly has a financial interest.

Questions should be directed to Bonneville's ethics official in the Office of General Counsel.

11.3 PURCHASING STANDARDS OF CONDUCT

BPI purchasing policy prohibits certain actions by Bonneville employees, consultants, and advisers, and by competing contractors involved in the conduct of any Bonneville purchase of supplies, services, or construction. The prohibited actions relate to (1) post-employment restrictions, (2) discussion of future employment, (3) gratuities, and (4) disclosure of proprietary or source selection information. Bonneville regulations implementing the policy are in BPI Part 3 and Appendix 3.

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11.4 BPA HARASSMENT POLICY

Under Bonneville policy, harassment will not be tolerated in the Bonneville workplace. With regard to contractors, harassment may occur either between contractor employees or between Bonneville and contractor employees. The role of the COR when contractor employees are or may be involved in harassment, is to direct complaints to the contractor's management for resolution. CORs are not to participate in complaint resolution.

Contractors working on-site at Bonneville are subject to Bonneville policies, including harassment-free workplace, through the inclusion of Clause 3-8, Contractor Compliance with Bonneville Policies, in their contract. Violations of the clause may result in termination of the contract for default. The CO should be informed of all pertinent facts in such situations. Further guidance on dealing with harassment is provided in a booklet published by Human Services, Diversity and EEO, and is available at all service centers and field personnel offices.

12 DO’S AND DON’TS FOR CORS

12.1 DO’S

(a) Maintain a teamwork relationship, keeping the contracting officer fully informed and current on major problems concerning the contractor's performance, costs, or adherence to clauses.

(b) Have a copy of the contract and all changes and modifications readily available, and be familiar with and understand all facets of the contract.

(c) Maintain a separate file for each contract.

(d) Work with the contractor, within your authority, as needed to get the job done.

(e) Assure that any required security screening is completed before allowing contractors access to Bonneville ADP resources.

(f) Attend scheduled meetings between the contracting officer and the contractor.

(g) Monitor the contractor's work to ensure performance consistent with contract requirements within the time and cost parameters stated in the contract.

(h) Provide periodic information to the contracting officer about the contractor's progress.

(i) Verify that unsatisfactory contractor performance is corrected, including observed unsafe practices affecting safety.

(j) Ascertain that Bonneville property is being used properly and that appropriate measures are being taken to protect and safeguard it.

(k) Assure that the contractor is providing timely response to all correspondence, and be timely yourself.

(l) Verify that the contractor has the correct personnel performing the contract work and a need exists for overtime (when the contract type, i.e., time and materials, requires such review).

(m) Follow up on corrective actions by the contractor as recommended by an authorized inspector(s). Ascertain that all emergencies are attended to and resolved immediately.

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(n) Give notice of technical non-compliance (technical direction) to the contractor in writing. If such notice is given orally, follow up with a written confirmation.

(o) Have regular and frequent contact (as necessary) with the contractor to ensure awareness of any potential concerns.

(p) Ensure that your replacement is thoroughly briefed, both verbally and in writing, on all important issues. Conduct contractual compliance checks and accurately record the information discovered.

(q) Document significant actions, conversations, etc. as they occur.

(r) Complete review and response regarding drawings, submittals, and other documents within the time specified in the contract

12.2 DON’TS

(a) Award, agree to, or execute a contract or contract modification. (Note: An exception is a construction contract field modification issued by a COR or field inspector within delegated limits, as set by the CO).

(b) Obligate, in any way, the payment of money by Bonneville unless delegated specific authority to do so.

(c) Make a final decision on any matter that would be subject to appeal under the disputes clause of the contract.

(d) Take action to terminate the contractor's right to proceed. (Note: Safety and health concerns require immediate action see BPI 15.12 and BPI Appendix 14-A for additional guidance.)

(e) Approve work that is not in conformance with the contract requirements.

(f) Make a final determination of contractor liability for loss or damage to Bonneville property. Monitor the contractor so closely that you interfere with the contractor's work.

(g) Encourage the contractor to perform work that is not specified in an existing contract, or permit the contractor to proceed with work outside the scope of the contract. Accept special favors or gratuities from the contractor.

(h) Tell the contractor how to carry out his/her responsibilities within any facet (technical, management, cost, or provisions) of the contract.

(i) Commit the equipment, supplies, or personnel of the contractor for use by others.

(j) Delay or cause to be delayed any correspondence or reports that require immediate response from the contractor, the contracting officer, or other Bonneville officials.

(k) Create an employer-employee relationship with contractor personnel through supervisory or administrative practices.

(l) Offer the contractor advice that may adversely affect contract performance, compromise the rights of Bonneville, provide the basis for a constructive change or impact any pending or future CO determination as to fault or negligence.

(m) Grant extension of time.

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(n) Divulge any sensitive or proprietary information. (Contact the CO for advice) Accept an appointment as a COR if there is an apparent conflict of interest. Exceed your authority as expressed (and limited) in your letter of appointment.

(o) Become involved in contractor's business affairs not covered in the contract. This includes disputes with subcontractors, interpersonal conflict among contractor's employees, etc.

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Exhibit 14-1 – Sample COR Delegation Memorandum

Date (Organization, Routing) Designation of Contracting Officer's Representative (Contract Number, Contractor Name) You are hereby designated the Contracting Officer's Representative (COR) for the subject contract. You represent the Contracting Officer in all technical matters that arise. Your major duties and responsibilities are contained in the "Contracting Officer's Representatives' Requirements for Contract Administration." (BPI Appendix 14). Your delegation is made without power of redelegation. The delegation shall remain in effect through the life of the contract unless it is revoked by the Contracting Officer, you are reassigned, or your employment is terminated. Therefore, it is important that you advise me immediately if someone else will assume your COR responsibilities for this contract. You are authorized to perform the following functions:

- Inspect and review work performed

- Inspect or witness test presentations or other activities

- Interpret technical specifications

- Approve submitted deliverables/reports

- Approve invoices

- Reject non-conforming services, materials, or equipment.

- Maintain a file of all contractor property purchasing and disposition documents

- Conduct required verifications of property listings (including annual physical verification of property).

You are not authorized to act for the Contracting Officer in the following matters pertaining to the contract:

- Approve contract modifications or change orders

- Authorize actions that result in a change in the contract price, technical specifications, or time of performance

- Approve subcontractors

- Except for unsafe practices or conditions, suspend or terminate the Contractor's right to proceed.

- Take action to terminate the contract for default or for Bonneville convenience.

- Make final decisions on any matters subject to appeal.

It is essential that the Contracting Officer be informed of the Contractor's progress. I have enclosed a master contract status report form tailored to your contract. Please make additional copies for your future use. Prepare and submit a status report upon receipt of deliverables or

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reports or upon completion of major contract performance milestones. Also, submit a status report upon receipt of invoices, attaching a copy of the invoice, for work performed.

Upon your recommendation, I have designated (Insert name) to act on your behalf during your absence on all technical matters relating to the contract. I ask that you familiarize her with your duties and responsibilities.

(Insert Name) is the Contracting Officer's Representative (COR) I have assigned to monitor this contract. Please contact him on all matters pertaining to administration of this contract. His telephone number is (xxx) xxx-xxx.

(CO Name)

Contracting Officer

Enclosure: Status report

cc:

Contractor Contracting Officer's Representative Disbursement Operations Alternate COR Official File – XXX

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Exhibit 14-2 – Sample Field Inspector Delegation Memorandum Date (Organization, Routing) Designation of Field Inspector (Contract Number, Contractor Name) You are hereby designated a Field Inspector for the subject contract. You shall represent the Contracting Officer's Representative in technical matters. Your major duties and responsibilities are outlined in the contract clause, Contracting Officer's Representatives. This delegation is made without power of redelegation and shall remain in effect through the life of the contract unless revoked by the Contracting Officer's Representative, you are reassigned, or your employment is terminated. You are authorized to perform the following functions:

- Inspect and review work performed.

- Advise contractor when it is not conforming to the contract requirements.

- Interpret technical specifications.

- Recommend to the CO approval or rejection of submitted services.

- Review invoices.

You are not authorized to act for the Contracting Officer's Representative in the following matters pertaining to the contract:

- Reject services.

- Authorize actions that result in a change in the contract price, technical specifications, or time of performance.

- Except for unsafe practices or conditions, suspend or terminate the contractor's right to proceed.

- Take action to terminate the contract for default or Bonneville convenience.

- Sign invoices for acceptance.

Contractor noncompliance with any portion of the contract and all contract changes are the specific responsibility of the Contracting Officer and the Contracting Officer's Representative. You need to notify me of any and all instances of noncompliance with the contract. I have designated (Insert Name) to act on your behalf during your absence on all technical matters relating to the contract. I ask that you familiarize her with your duties and responsibilities.

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Please do not hesitate to contact me if you have any questions. (COR Name) Contracting Officer's Representative cc: Contracting Officer Contractor Alternate Field Inspector Official File – XXX

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Exhibit 14-3 – Contracting Authority and Communication Channels

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Exhibit 14-4 Typical Contents of COR’s Contract Administration File

A uniform and orderly approach to file maintenance will reduce time spent searching for material and provide neat, standardized files. Consistency is important. It is recommended that the COR establish a contract administration file similar to that used by the CO or COR. The COR may use the agency approved electronic records storage application to retain contract documentation. The following is a sample format, to be adapted as necessary for the type of contract:

(1) File identification: The following information typically should be used to identify award files:

Contractor Name Project Name and/or Number Contract No.

(2) File content: This is a suggested file format, which may be modified as necessary for the

contract type (service, supply or construction). (3) Contract and Supplements

Purchase requests Copy of executed original contract and all modifications

(4) Basic File

(a) Bonds and insurance certificate(s) (i) Performance and payment bonds (ii) Insurance certificate(s) (iii) Surety status inquiries

(b) Contractor performance evaluation/award fee/quality assurance (c) Forms (travel, training, etc.) (d) Labor clearances and enforcement record(s)

(i) Certified payroll (ii) Contractor employee interview forms

(e) Log of significant activities (f) Meeting notes (g) Overtime approvals and other work-progress related documents (h) Reports (accident, audit, contractor progress, COR performance status, financial,

receiving, workforce status, etc.) (i) Schedule of compliance reviews Project staffing/organization charts List of BPA-

furnished property (j) Close-out records

(i) Final inspection memo (ii) Final acceptance letter (iii) Contract completion report (iv) Release of claims Contractor evaluation (v) Contract close-out checklist

(5) Correspondence File

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a) Copies of all correspondence between COR and CO/COR b) Copies of all correspondence between COR and Field Inspectors c) COR and any Field Inspector designation d) Internal memoranda e) Record of communication between COR and other support activities f) Copies of all correspondence between COR and contractor Copies of all general

correspondence related to contract Copies of all correspondence regarding labor issues g) Copies of all notices to proceed, stop or report submittals h) Copies of all letters of approval pertaining to such matters as materials, the contractor's

quality control program, prospective employees, and work schedules

(6) Payment File a) Backup documentation for contractor payment or progress payments b) Copies of inspection reports related to payment c) Copies of invoices d) Information relative to discount provisions for prompt payment e) Correspondence pertaining to payment f) Payment status log

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Exhibit 14-5 – COR’s Status Report

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Exhibit 14-6 – Sample of a Correction Memorandum

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Exhibit 14-7 – Sample Notice for Improper Invoice

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Exhibit 14-8 – Checklist for the Review of Cost Reimbursement Contract Invoices

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Exhibit 14-9 – Invoice Control Sheet

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Exhibit 14-10 - Definitions

"CO" means Contracting Officer.

"CS" means Contract Specialist.

"COR" means Contracting Officer's Representative.

“COR Certification” means the program to verify that an individual has successfully completed the required Bonneville COR training and has adequate program level experience to qualify them to perform the roles and responsibilities of the position.

”Contract" means a legal instrument reflecting a relationship between Bonneville and another party where the principal purpose of the instrument is the acquisition, by purchase, lease or barter, of property or services for the direct benefit or use of Bonneville. In the context of this Guide, the terms "contract" and "contract administration" also apply to Intergovernmental Contracts.

"Field inspector" means one or more individuals that are delegated authority to monitor the performance of the contractor.

"General Scope of the Contract" means the work which was fairly and reasonably within the contemplation of the parties when they entered into the contract. This can be defined by determining what each party planned to do as a result of the contract. Generally, changes to specific elements or parts of the work would be considered "within the scope" if the end product of the contract was essentially the same as that contracted for initially. Changes that are beyond the scope of the contract are considered new purchases which require the competition requirements of the BPI to be met.

"Program Office" means the office that is the source of funds for the contract. This office determines major program goals and policies, and allocates funds, personnel, and other resources among the programs for which it is responsible, and determines other major facets of the contract effort.

"Requisitioner" means the person in the program office who is responsible for developing the project supported by a specific award, and the person who concurs with any proposed program-type modifications to agreements before action by the CO.


PropertyManagementProceduresforContractors

BPIAppendix19


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1.1 General ....................................................................................................................... 164

1.2 Definitions ................................................................................................................... 164

1.3 Property Clauses ........................................................................................................ 165

1.4 Firm-Fixed Price / Cost Reimbursement Contracts .................................................... 165

1.5 Providing Materials ..................................................................................................... 165

1.6 Responsibilities and Liabilities for Bonneville Property .............................................. 165

1.7 Property in Possession of Subcontractors .................................................................. 166

1.8 Records ...................................................................................................................... 167

1.9 Receipt of Bonneville-Furnished and Contractor-Acquired Property .......................... 169

1.10 Identification ............................................................................................................... 169

1.11 Utilization .................................................................................................................... 169

1.12 Physical Security, Care and Maintenance .................................................................. 170

1.13 Physical Inventories .................................................................................................... 170

1.14 Disposition .................................................................................................................. 171

1.15 Property Condition Codes .......................................................................................... 172

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1.1 GENERAL

This supplement prescribes procedures to contractors for managing Bonneville-furnished and contractor acquired property (CAP).

1.2 DEFINITIONS

“Adjusted Depreciated Value” means the final adjusted value of an asset taking into account the depreciated value and the asset’s physical condition.

"Bonneville-furnished property" means property in the possession of or directly acquired by Bonneville and subsequently made available to the contractor.

"Bonneville property" means all property and materials owned by, leased to, or acquired by Bonneville under the terms of the contract. It includes both Bonneville-furnished property and contractor-acquired property as defined in this section.

"Capitalized equipment" means personal property items having a unit acquisition cost of $10,000 or more with a useful service life of one year or more, and generally has a property tracking number assigned and is carried on the financial ledger as an asset (i.e., not expendable due to use).

"Contract Inventory" means:

(a) Any property acquired by and in the possession of a contractor or subcontractor under a contract for which title is vested in Bonneville.

(b) Any property to which Bonneville is obligated or has the option to take title to under any type of contract as a result either of any changes in the specifications or plans or of the termination of the contract (or subcontract thereunder), prior to completion of the work; and

(c) Bonneville-furnished property that exceeds the amounts needed to complete full performance under the entire contract.

"Contractor-acquired property" means property acquired or otherwise provided by the contractor for performance of a contract, to which Bonneville has title or the right to take title under the contract terms.

"Cost-reimbursement contract" means the contractor is reimbursed for its costs.

"Custodial records" means any document such as requisitions, property receipts, issue documents, tool checks, stock record books, etc.

"Excess" means any property that is no longer used, needed, or required by Bonneville.

“Expendable property” means property and material, which when put to use, are consumed, lose their identity, or become an integral part of other property.

"Fixed-price contract" means that the contractor receives a stated amount regardless of the costs the contractor incurs.

"Material" means property which may be incorporated into or attached to a deliverable end item or which may be consumed or expended in the performance of a contract. It includes assemblies, components, parts, raw and processed materials, and small tools and supplies that may be consumed in normal use in the performance of a contract.

"Non-Expendable Equipment" means property which has continuing usefulness as a self contained unit, is not consumed in use, and does not lose its identity when put to use or does not ordinarily become a component of other equipment or plant. It may or may not be capitalized.

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"Personal Property" is defined as all property other than real property, property that becomes permanently affixed to real property, or property that becomes a component part to another asset.

"Physical inventory" means the actual observation and count of the property to be reconciled with custodial records.

"Property Administrator" or Organizational Property Management Office provides advice/guidance on Bonneville's property management and control requirements.

"Salvage" means property that has some value in excess of its basic content, but which is in such condition that it has no reasonable use for any purpose as a unit, and its repair or rehabilitation is clearly impractical or uneconomical.

"Scrap" means property that has no reasonable value except for the recovery value of its basic material/mineral content.

“Sensitive property” means items, regardless of value, requiring special control and accountability because of susceptibility to unusual rates of loss, theft, or misuse, or due to National Security and Export Control considerations.

"Surplus" means inventory excess to the contract that is not required by other Federal agencies.

"Termination inventory" means any property purchased, supplied, manufactured, furnished, or otherwise acquired for the performance of a contract subsequently terminated and properly allocable to the terminated portion of the contract.

1.3 PROPERTY CLAUSES

See Bonneville Property Clauses in the contract.

1.4 FIRM-FIXED PRICE / COST REIMBURSEMENT CONTRACTS

Under a fixed price contract Bonneville shall retain title to all Bonneville-furnished property until such times as Bonneville decides to relinquish or transfer title through a disposal action such as donation, sale, or abandonment.

Under a cost reimbursement contract, the Bonneville has title to all property that is Bonneville-furnished or contractor acquired as a direct cost of performance under that contract.

1.5 PROVIDING MATERIALS

Contractors shall ordinarily furnish all material for the performance of Bonneville contracts. However, Bonneville shall provide material to a contractor when necessary to achieve significant economy, standardization, expedited production, or when it is otherwise in Bonneville's best interest. Material to be furnished by Bonneville under the contract must be set forth in the solicitation and the contract.

1.6 RESPONSIBILITIES AND LIABILITIES FOR BONNEVILLE PROPERTY

(a) Responsibilities.

(1) The contractor is directly responsible and accountable for all Bonneville property in its possession or control in accordance with the requirements of the contract. This includes Bonneville property in the possession or control of a subcontractor. The contractor shall establish and maintain a property system in accordance with the contract to control, protect, preserve, and maintain all Bonneville property. This property control system shall be in

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writing unless the CO determines such a document to be unnecessary. The system shall be approved in writing by the CO.

(2) The contractor's property control system is subject to review by Bonneville as often as circumstances warrant during the contractor's performance, at contract completion or termination, or at any time thereafter while the contractor is required to retain the contract records. The contractor shall take necessary action to correct deficiencies found during any review.

(3) The contractor shall designate one individual in writing, who is not the user of the property, as the primary property contact for the contract.

(4) The contractor shall maintain and make available accurate property records and shall account for all Bonneville property until relieved of that responsibility by the CO.

(5) The contractor shall require subcontractors who are provided Bonneville property under the prime contract to comply with the provisions of this paragraph. Procedures for assuring subcontractor compliance shall be included in the contractor's property control system.

(6) The contractor shall promptly report all Bonneville property in excess of the amounts needed to complete full performance under the contracts providing it or authorizing its use.

(7) When unrecorded Bonneville property is found, both the cause of the discrepancy and actions taken by the contractor to prevent recurrence shall be determined and reported to the CO.

(b) Liabilities.

(1) Subject to the terms of the contract and the circumstances surrounding the particular case, the contractor may be liable for shortages, loss, damages, or destruction of Bonneville property. The contractor may also be liable when the use or consumption of Bonneville property unreasonably exceeds the allowances provided for by the contract, the bill of material, or other appropriate criteria.

(2) The contractor shall promptly report to the COR any shortage, loss, damage, or destruction of Bonneville property in its possession or control, or in the possession or control of any subcontractor, together with all the facts and circumstances of the case as soon as the facts become known, or when they are requested by the CO. The liability for loss, damage, or improper use of Bonneville property will depend upon all the circumstances surrounding the particular case and will be determined by the CO in accordance with the provisions of the contract. The contractor will furnish all data necessary to substantiate any request for discharge from responsibility. The contractor shall immediately report loss that may be due to theft to local police and/or Federal Bureau of Investigation (FBI) and the COR.

(c) Relief from responsibility. Unless the contract or CO provides otherwise, the contractor shall be relieved of the responsibility for Bonneville property consumed in the performance of the contract.

1.7 PROPERTY IN POSSESSION OF SUBCONTRACTORS

The contractor shall require any of its subcontractors possessing or controlling Bonneville property to adequately care for and maintain that property and ensure that it is utilized only as authorized by the contract. The contractor's approved property control system shall include procedures to ensure this responsibility. The contractor shall also hold its subcontractors possessing or controlling Bonneville property accountable under the contract to investigate and report all instances of loss, damage, or destruction of such property.

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1.8 RECORDS

(a) Bonneville Property. Property records are the means by which location and status of property is recorded from acquisition through utilization and disposal. Separate property records for each contract are desirable, but a consolidated property record may be maintained if it provides the required basic information (see paragraph 1.8(a)(6)).

(1) The contractor shall establish and maintain adequate property control records, manual or automated consistent with the requirements of this section for all Bonneville property provided under a contract, including property provided under such contract in the possession or control of a subcontractor. The records specified in this section are the minimum required by Bonneville unless directed otherwise by the CO, when a subcontractor has an approved property control system for Bonneville property provided under its own separate prime contract, the contractor shall utilize the records created and maintained under that system.

(2) Contractor records of Bonneville property established and maintained under the terms of the contract are the official property records. Duplicate official records shall not be furnished to or maintained by Bonneville personnel, except when the contract provides for the CO to maintain Bonneville's official property records when Bonneville property is furnished to a contractor.

(3) Official property records must identify all Bonneville property and provide a complete, current, auditable record of all transactions. The contractor's system of record maintenance shall be sufficient to adequately monitor Bonneville property. The contractor's system of records maintenance, as a minimum, shall be equivalent to and maintained in the same manner as the contractor's system for maintaining records of contractor-owned property, but need not exceed the requirements of this paragraph. The records shall be safeguarded from tampering or destruction. Records shall be accessible to authorized Bonneville personnel at all reasonable times. All these records, including related correspondence, shall be made available to Bonneville or other Government auditors upon request.

(4) The contractor's property control system shall be adequate to locate any item of Bonneville property within a reasonable period of time.

(5) A multi-contract costs and material control system may be authorized if --

(i) The contractor demonstrates that adoption of the system will result in savings or improved operations, or that it will otherwise be in the interest of Bonneville;

(ii) The system is applied to existing Bonneville contracts only and excludes materials acquired or costs incurred for non-Bonneville work or in anticipation of future Bonneville work; and

(iii) The contractor's accounting system is adequate to provide on a complete and timely basis a clear "audit trail" from costs of materials acquired for each contract to materials used or disposed of on each contract.

(6) Basic information. The contractor's property control records shall provide the following basic information for every item of Bonneville property in the contractor's possession:

Contract number

Nomenclature or description of item

Quantity received Quantity issued Balance on hand

Posting reference and date of transaction

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Unit price/acquisition cost

Location

Disposition

(7) Custodial Records. Custodial records should be maintained for tool crib, security equipment, protective clothing and other items issued for the use of the contractor in the performance of the contract.

(b) Capitalized Equipment.

(1) The contractor shall maintain individual item records for each item of equipment having a unit cost of $10,000 or more. Summary records may be maintained for equipment costing less than $10,000 per unit, except where individual item records are necessary for effective control, calibration, or maintenance.

(2) In addition to the information required in 1.8(a)(6) above for each item of Bonneville-owned equipment having a unit cost of $10,000 or more, the following information is required:

(i) The manufacturer's name; model or part number;

(ii) Serial number and year built;

(iii) Identification number; and

(iv) Acquisition and disposition document references and dates.

(3) The CO may determine that the information in (2) (ii) and (iii) above should be recorded in the property records for equipment costing less than $10,000, e.g., sensitive and safety equipment.

(4) Accessory and auxiliary items that are attached to, part of, or acquired for use with a specific item of capital equipment shall be recorded on the record of the associated item of capital equipment. When accessory and auxiliary items are permanently removed from the

(c) Materials

(1) General. All Bonneville material furnished to the contractor, as well as other material to which title has passed to Bonneville by reason of allocation from contractor-owned stores or purchase by the contractor for direct charge to a Bonneville contract or otherwise, shall be recorded in accordance with the contractor's property control system and the requirements of this section.

(2) Consolidated stock record. When a contractor is provided Bonneville material under more than one contract, the CO may authorize a consolidated record for materials, if the total quantity of any item is allocated to each contract-by-contract number and each requisition of material from contractor-owned stores is charged to the contract on which the material is to be used.

(3) Use of receipt and issue documents. The CO may authorize the contractor to maintain, in lieu of stock records, a file of appropriately cross-referenced documents evidencing receipt, issue, and use of Bonneville-provided material that is issued for immediate consumption and, as a matter of sound business practice, is not entered in the inventory records.

(4) A multi-contract costs and material control system may be authorized for the physical identification of Bonneville material, if the contractor demonstrates that adoption of the

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system will result in savings or improved operations or is otherwise be in the interest of Bonneville.

1.9 RECEIPT OF BONNEVILLE-FURNISHED AND CONTRACTOR-ACQUIRED PROPERTY

(a) Receipts. The contractor shall furnish the COR with written receipts for all or specified classes of Bonneville property prior to reimbursement. If evidence of receipt is required for contractor-acquired property, the contractor shall provide it before submitting a request for payment of the property. For Bonneville-furnished property, the contractor shall provide the required receipt immediately upon receipt of the property.

(1) Inspection, transfer. All Bonneville-furnished property shall be inspected and tested/operated by the contractor at the time of receipt. Any visible or other external evidence of damage or error in quantity should be noted on the property transfer document with the signature of the carrier's agent. As soon as possible, the contractor shall furnish the CO a full report of the damage or quantity error, including extent, apparent cause, and the estimated costs of repairs. Only that quantity of property actually received will be recorded on the official records.

(2) Inspection, acquisition. The contractor shall inspect at the time of receipt, all property that is acquired for the performance of the contract, and take necessary action with the vendor and/or carrier to correct or adjust for any damage or error in quantity.

(3) Warranty documentation. Procedures shall be established by the contractor to protect applicable warranty rights that accrue to Bonneville with the acquisition of Bonneville property.

(b) Contractor-acquired property. The contractor shall take all actions necessary to adjust overages, shortages, or damages in shipment of contractor-acquired property from a vendor or supplier. However, when the shipment has been moved by Government bill of lading and carrier liability is indicated, the contractor shall report the discrepancy in accordance with Paragraph (a) above.

(c) Segregation. Bonneville property shall be segregated from contractor-owned property when feasible.

1.10 IDENTIFICATION

The contractor shall identify, mark, and record all capital and sensitive items of equipment promptly upon receipt, with the exception of leased or rented equipment. The contractor shall permanently mark the property in a legible, conspicuous, and tamper-proof method to identify it as Bonneville-owned. The identification markings shall consist of a serial number and an indication of Bonneville ownership. This identification shall be maintained as long as such property remains in the custody, possession, or control of the contractor. Property identification numbers for Bonneville-furnished property will be provided to the contractor by the COR. The contractor shall record applicable number(s) on receiving, shipping, and disposal documents, and any other documents pertaining to the property control system. The contractor shall remove or obliterate markings when Bonneville property is sold, scrapped, abandoned, or donated.

1.11 UTILIZATION

It is Bonneville's policy that all Bonneville property furnished under a contract shall be fully utilized. The contractor's property and supply management practices shall assure that the maximum and best possible use is made of the property. Materials and equipment shall be

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limited to those items essential for effective execution of work performed under the contract. The use of Bonneville property for non-contract purposes is prohibited without the prior written consent of the CO.

1.12 PHYSICAL SECURITY, CARE AND MAINTENANCE

(a) General. Controls such as property pass systems, memorandum records, marking of tools, regular or intermittent gate checks and perimeter fencing shall be implemented, (commensurate with the value of the property) to prevent loss, theft, or unauthorized movement of Bonneville property from the premises.

(1) The contractor shall ensure that effective procedures and practices are established for administrative and physical control of tagged and tracked property items before and after such items are issued. The CO shall contact Shared Services Personal Property group prior to providing the Contractor with instructions for tagging and tracking Bonneville property under the Capitalization threshold.

(2) At a minimum, controls on sensitive property shall include property records, memorandum receipts, bin or tool check systems, or combinations thereof. Procedures shall provide for physical inventories at least once each year, and methods for adjustment of inventory levels due to losses, thefts, and damages. More frequent inventories may be necessary when the value of the property, degree of security achieved, or loss experience indicates that more stringent controls are required to protect Bonneville's interest. Such procedures and practices shall be subject to the CO/COR review and approval.

(b) Weather. The contractor shall ensure the protection of any Bonneville property that is susceptible to weather damage.

(c) Care and Maintenance. The contractor shall be responsible for the proper care and maintenance of Bonneville property in its possession or control from the time of receipt until relief of responsibility, in accordance with sound economic industrial practice, the manufacturer's recommendation, and the terms of the contract. The removal of Bonneville property to storage, or its contemplated transfer, does not relieve the contractor of these responsibilities.

(d) Major repairs or rehabilitation. The contractor's maintenance program shall provide for disclosure to the COR of the need for major repairs, replacement, and other rehabilitation work on Bonneville property in its possession or control.

(e) Records of maintenance. The contractor shall keep records listing the type of maintenance and repair performed and the associated cost. Upon completion of the contract the contractor shall provide the COR with copies of the maintenance records. Deficiencies discovered as a result of inspections on Bonneville-furnished property shall be reported to COR as soon as practical.

1.13 PHYSICAL INVENTORIES

(a) General. The contractor shall conduct periodic physical inventories of all Bonneville property and shall cause subcontractors to do likewise. The contractor, with the approval of the CO, shall establish the type of inventory and procedures. The type of inventory should be based on the contractor's established practices, the type and use of Bonneville property involved, or the amount of Bonneville property involved and its monetary value, and the reliability of the contractor's property system. Procedures that are limited solely to a check-off of a listing of recorded property do not meet the requirements of a physical inventory. Personnel who perform the physical inventory shall not be the same individuals who maintain the property records or

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have custody of the property. The inventory shall be conducted in accordance with the following frequencies:

(1) Permanently affixed plant (such as fencing, buildings, utilities, and systems - every 10 years; (2) Moveable capital equipment – Bi-annually;

(3) Non-Capital equipment - annually; and

(4) Stores inventories - annually.

(b) Reporting results of inventories. Results of the inventory must be recorded on the property records. The report shall include a signed statement that the inventory was completed on a certain date, the inventory method used, and that the physical inventory was found to be in agreement with the official property records, except for the discrepancies reported. The report shall contain all discrepancies disclosed by the physical inventory. As a minimum, the discrepancy listing shall contain the property number, nomenclature, and unit cost. The report and signed statement shall be furnished to the COR no later than 30 days after completion of the physical inventory.

(c) Immediately upon termination or completion of a contract, the contractor shall perform and cause each subcontractor to perform a physical inventory and an assessment of condition (see Exhibit 1, Condition Code listing), adequate for disposal purposes, of all Bonneville property applicable to the contract. This inventory shall also include all Bonneville property in a subcontractor's possession or control, which applied to the completed or terminated contact. This inventory report shall be submitted to the CO for verification and disposal instructions.

1.14 DISPOSITION

(a) General. Property shall not be disposed of without prior approval of the CO. The contractor is responsible for disposing of all Bonneville property as provided in the contract or as directed by the CO. The contractor shall promptly advise the CO of any Bonneville property that becomes excess to the requirements for contract performance and shall take disposition action as directed.

(b) Disposal methods for supplies and materials. Bonneville may exercise its rights to require delivery of any contract supplies and materials inventory. If Bonneville does not exercise these rights, the contract inventory shall be disposed of by one of the following methods in the priority indicated:

(1) Return of contractor-acquired property to suppliers. The CO shall encourage contractors to return allocable quantities of contractor-acquired supplies and materials to suppliers for full credit less either the supplier's normal restocking charge or 25 percent of the cost, whichever is less.

(2) Purchase or retention at cost by prime contractor or subcontractor of contractor-acquired supplies and materials. The CO shall encourage contractors to purchase or retain contractor-acquired supplies and materials at cost. However, the contractor shall not include any part of the cost of supplies and materials purchased or retained in any claim for reimbursement against Bonneville. If a contractor purchases or retains contractor supplies and materials inventory for use on a continuing Bonneville contract that is subsequently terminated, the supplies and materials shall be allocated to the continuing contract, even though its purchase would otherwise constitute undue anticipation of production schedules.

(3) Sale at the fair market value of excess supplies and materials

(c) Disposal methods for property other than supplies and materials. Bonneville may exercise its rights to require delivery of any contract property other than supplies and materials inventory. If

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Bonneville does not exercise these rights, the contract inventory shall be disposed of by one of the following methods in the priority indicated:

(1) Deliver the property inventory to Bonneville for either reutilization or disposal by Bonneville.

(2) Purchase or retention at cost by prime contractor or subcontractor of CAP. The CO shall encourage contractors to purchase or retain contractor-acquired property other than supplies and materials at cost. However, the contractor shall not include any part of the cost of the property purchased or retained in any claim for reimbursement against Bonneville. If a contractor purchases or retains contractor property other than supplies and materials inventory for use on a continuing Bonneville contract that is subsequently terminated, the property shall be allocated to the continuing contract, even though its purchase would otherwise constitute undue anticipation of performance schedules.

(3) Bonneville will transfer title to the property to the contractor if Bonneville declares the property excess to Bonneville’s needs.

(4) Destruction or abandonment. If determined that the property has no commercial value or no value to Bonneville, the estimated cost of care and handling exceeds any potential sale price, or does not constitute a danger to public health, safety, or welfare, the property may be abandoned or destroyed on the contractor’s premises with written consent.

(5) Donation. If determination has been made by Bonneville, the property may be donated to public bodies or educational institutions in lieu of abandonment or destruction. All costs incident to the donation shall be borne by the donee.

(d) Retirement. The contractor shall notify the COR when capital equipment is worn out or damaged beyond economical repair. The CO shall provide to the contractor instructions as to the disposition of worn out or damaged property.

1.15 PROPERTY CONDITION CODES

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